US in Focus: SP500 and the USDX

July 20, 2016

There are a plethora of analyst soundbites doing the rounds today, featuring the standard “stocks are at record highs because the chance of a US recession is no longer there, deflation is out the window and the labour market is still printing respectable numbers release after release throughout this period of uncertainty.”

Sure it’s such a convenient and simplistic way of looking at markets on a day to day basis, but it really is what it is.

This is the human emotion behind the moves that we’ve been saying across US markets. Now as a trader, ask yourself whether you believe this run of optimism is warranted or not, and then trade the technical signals in the direction that gives you the biggest chance of being on the right side of a game changing move if the market has to re-price.

But with the Fed still doing what I’d call a good job in communicating to markets their expectations for the resumption of interest rate hikes and managing market expectations well, a re-pricing on stocks from a fundamental point of view isn’t on the top of my trade ideas list.

S&P 500 4 Hour:
Click on chart to see a larger view.

Again, looking at the technicals on the 4 hour SP500 chart from our Vantage FX MT4 platform, I still can’t make a case for a consistent pullback here either.

Intra-day, price is still in the midst of a strong bullish trend, with momentum still obvious following the break-out to record highs the other week. Price now continues to drift sideways in a bullish flag: A reliable continuation pattern as highlighted in the Education Centre of the website.

This is not yet the safest time to get down onto the train tracks and jump in front of momentum.

USDX Daily:
Click on chart to see a larger view.

Moving to currencies and with it being a slower than usual news day (touch wood), we turn our focus to the US Dollar Index and the currency’s near term strength as a whole.

What I did want to highlight is this possible gap-fill play which also sees a nice confluence of trend line resistance.

It’s always handy to keep the USDX chart open with alarms at key levels like this to help in your decision making process when trading the majors.


While we don’t have an economic calendar packed with pending USD sensitive moves, we do have jobless claims and existing home sales to spark some short term price action.


On the Calendar Wednesday:
GBP Average Earnings Index 3m/y
GBP Claimant Count Change

USD Crude Oil Inventories

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Dane Williams – @VantageFX

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