• Dragostin Kozhuharov

SP500 pulled in both directions

So far this week, the main US index , has been pulled both to the upside and the downside due to a mix of economic data, headlines and falling or rising oil prices.

Let's have a look at what is going on:


US oil futures hitting negative prices for the first time in history on Monday, also led stocks lower with the move continuing and extending until Wednesday.


Then we started seeing a rebound in oil which also fueled indices move back to the upside. Also the approval of additional support for medium and small businesses in the US managed to help for a move to the upside.


Yesterday, reports came in that Gilead drug that was tested as a treatment for Covid 19 had showed disappointing results and indices headed back to the downside. Another important measure for the economy in terms of unemployment - the weekly initial jobless claims came in at 4.427million. To give you a better perspective of what this means - the US has now wiped out all the job gains since the Great Recession* (CNBC).


Earlier today the SP500 cash was trading close to the 2800 mark and even though overall the week is forming to be a losing one for the index, it has been all over the place as we can observe from the chart below.

SP500 Cash 4hr Chart


The candlesticks inside the box show the week so far in 4hr timeframe for the SP500. It seems that it has mainly revolved around the 2800 handle. The low for the week stands at 2726.40, whereas the high for the week is just below the high for April which currently stands at 2894.40.

SP500 Cash Daily Chart


Looking at the higher daily timeframe we can see that the price currently stands sort of in the middle between the April high of 2894.40 and 2646.40 (31st March high). Going forward to potentially gauge the direction which equities and indices are going to take, these two levels could be the ones to watch. Breakouts could lead to extensions either to the upside or the downside.

SP500 Cash Weekly Chart


Finally we take a look at the weekly chart from a technical perspective. If the week closes in the manner which we see currently on the chart, a reversal candlestick pattern is forming, signalling potential downside next week. If this is backed by a break below the 2646.40 level which we discussed earlier we can see some further momentum to this move lower.


In terms of fundamentals, next week we will have the Preliminary Q1 GDP for the US, Fed Interest Rate Decision with a Press conference and Initial jobless claims. Furthermore watching the Oil prices and whether they continue to recover or take another plunge could affect indices.


*https://www.cnbc.com/2020/04/23/the-us-economy-has-now-erased-all-job-gains-since-the-great-recession.html?__source=newsletter%7Cmorningsquawk


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