Review of global indices as S&P 500 sets all-time high
Hopes of further stimulus have pushed stock markets higher this week. While European indices have seen steady recoveries, in the US the S&P 500 has been hitting new all-time highs. But should we expect this strength to last?
DAX 30 futures have been trading in a rather directionless sideways trend all of this year in a range from 8690 up to the April high of 10522. They recovered this week to a little over the mid-point of this range as we target 200-day moving average resistance at 10060/70.
Unfortunately there is absolutely no clear direction for this market other than sideways over the summer months. It’s just one big picture of confusion with no clear patterns to go on.
FTSE 100 futures however have been far more interesting and certainly entertaining. The Brexit collapse of just over 650 points of course caught so many traders and investors out, and they were wrong-footed again by the huge recovery the following week as prices rocketed every day, from a Friday 24 June low of 5675 to a Friday 1 July high of 6561.
In the process we beat the previous high for the year, set in April at 6387, as well as the Q4 2015 high of 6449. Last week the FTSE paused to catch a breath but bottomed nicely just 10 points below the support from the April high of 6387.
Even a strong recovery in the British pound could not dent sentiment yesterday with the index reaching a high of 6652 so far this week. With no sell signal I can see that, despite overbought conditions, it seems unwise to bet against the bulls at this stage. Further gains look likely to target 2015 Q3 highs at 6720-6762.
US markets have remained strong over the past 18 months, shaking off negative sentiment and a potential increase in interest rates from the Fed. Each of the three major setbacks – in October 2014, the summer of 2015 and the start of 2016 – has been an excellent buying opportunity as investors jump in quickly to return the index towards previous highs.
The E-mini S&P has been the big winner beating the previous all-time high and setting new records all week. As I write this new all-time high stands at 2149.25 on Wednesday morning but by the time you read this we could be higher.
The E-mini S&P weekly chart above says it all. The huge 18-month sideways pattern was a continuation pattern. We have broken decisively out of the sideways channel to the topside. One of the longest bull markets in history, lasting over eight years, is clearly not worried about potential weaknesses in the global economy. Every time there is a bout of panic or uncertainty, investors are waiting on the sidelines ready to pounce on the buying opportunity.
Technical Analyst & Trader
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