S&P500 Index Daily Chart 8/19/2012 9:00PM EDT
Risk sentiment continues to be positive as shown by the S&P500 futures. The bull run since June from the 1261.75 low is now coming up against the 2012 high at 1419. As we start the trading week (8/20-8/24), the index is sitting just under this pivot, as seen in the daily chart.
One of the ways to project a bullish continuation after a correction is to use the extended fibonacci retracement levels ie. 138.2%, 150%, and 161.8%. Based on this method, the break above 1420 should open up a target zone roughly between 1478.75 and 1516.15, basically around the 1500 handle.
Signs of a Bullish Trend:
This bullish outlook is a trend following one based on the alignment of moving averages in the daily and weekly charts. (A bullish alignment has the largest period at the bottom going up to the lowest at the top closest to price action). Daily and weekly shows 200SMA at the bottom going up to the 8SMA near price, albeit 100-daySMA=55-daySMA. Still, we can see that the 55-day SMA is crossing the 100-day SMA.
Look out for a Correction:
Though the outlook remains bullish, it should be noted that as the market attempts to clear a new 2012 high, we might see some correction, especially if the RSI in the daily chart tags 70. With the bullish outlook in mind, a bearish short to medium term corrective outlook limited to the middle of the March-August consolidation zone would be limited to 1340.40. A push below that makes the bullish outlook suspect, and in fact brings a double top scenario in consideration.
Implication for USD:
The implication this has on the currency market is that the USD might regain some strength in the short to medium term, but appears to be have some weakness ahead if risk-on does indeed continue to extend.
S&P500 Index Weekly Chart 8/19/2012 9:10PM EDT
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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