Article / 03 February 2016 at 13:29 GMT

Equity bulls gone astray again

Technical Analyst / FuturesTechs
United Kingdom
  • January's global equity markets selloff was followed by signs selling was excessive
  • S&P 500 futures and Dow futures retracement targets were reached at end-January
  • Yesterday scales tipped in favour of bears again
  • Bears could give a fresh test of 1,851, 1,830 and 1,804.25 points in S&P 500
  • Important Dow reference points to watch today are at 16,168 and 16,200-209
  • If 16,020 is broken, watch for a fresh test of 15,365 points, the January low

 Signs that the January plunge in global stock markets was overdone briefly let bulls loose, but 
yesterday tipped things in favour of the bears again. Photo: iStock

By Clive Lambert

Where have the bulls gone now?

The S&P 500 futures (March ’16 delivery) and other global indices sold off sharply in January, led by a rout in China. But on January 20 buyers stepped back in, and a "Hammer" reversal appeared on the charts to signal the selling might be done, at least for now. All eyes were on retracement targets, and I flagged 1,919 points in the S&P and 16,322 points for the Dow futures as potential targets.

Come the end of January these targets were achieved. The S&P finished last week/month at 1,933 points, extending to 1,940 on Monday, when a "Doji" candle was formed, indicating that sellers and buyers pretty much balanced each other out. Yesterday the scales tipped in favour of the bears, producing a large red candle with Marabuzo resistance at 1,912.50 points, taking us back below 1,919 and another level I was watching at 1,905, and posting a low close to boot. 

S&P 500 daily shows retracement after sharp January selloff 
S&P 500 Daily
Source: CQG Inc 

S&P 500 weekly chart
S&P 500 Weekly
Source: CQG Inc

So what we saw before and after the weekend could be interpreted as end/start-of-month "window dressing", and price action this week seems to confirm that. This suggests the bears could get busy again, and give us a fresh test of 1,851, 1,830 and 1,804.25 points in the S&P 500.

It was a similar story in the Dow futures (March ’16), with the market getting a nosebleed just above Fibonacci resistance at 16,322 points and then seeing sellers returning yesterday.
Important Dow reference points to watch today are at 16,168 and 16,200-209 before we’re back at our 16,322 focus level.

Dow futures daily
Dow Daily
Source: CQG Inc

Dow futures weekly

Dow Weekly

Source: CQG Inc

Once 16,020 is broken, we can watch for a fresh test of 15,365 points, the January low, which was a hold of the low from last August at 15,285.

Floor of the New York Stock Exchange
Floor of the New York Stock Exchange, where bulls and bears come and go, 
but the market is always right. Photo: iStock

— Edited by John Acher

Clive Lambert is chief technical analyst at FuturesTechs

Want to hear the very latest on the outlook for major currencies after a very rocky start to 2016?
Click here to listen in to Saxo’s FREE forex trading webinar.

The date is Thursday, February 4, the time is 1830 CET and your host is John J Hardy, head of FX strategy.


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