S&P500

US Q4 GDP is estimated to be 2.8% in the advanced reading. The forecast was 3.0% and the previous quarters GDP was revised down from 2.5% to 1.8%. This takes  the US recovery assessment a couple notches down. The market is reacting with risk aversion. We can see this in the S&P 500 futures. It was already falling from 1329.25, but was consolidating over the Asian-European session leading to the 1/27 US session.

After the GDP release, the 1H chart shows a sharp decline. This decline is now sliding below the 78.6% retracement of this week’s rally, testing 200 hour simple moving average, right below which is the rising trendline. The RSI is also testing 40, a break below which kills the previous bullish momentum, and a break below 30 establishes short-term bearish momentum. If the market pushes below the support factors, which has a last “line of defense” at 1300, we are opening up risk aversion for the upcoming weeks.

The daily chart shows that below the rising trendline seen in the 1H chart, there is another one of larger degree. Also, we see that a bearish outlook will be in the context of a correction against an the bull run from since Nov 2011. In fact the uptrend started even earlier in September. But just taken the run from November, we see an important pivot at 1271. There is also the 38.2% retracement level at 1277.97, so the area between these two support factors should be the maximum target zone for now.

For the forex markets, if the SP500 falls below 1300, there should be strength seen in the USD, meaning pressure on EUR/USD and AUD/USD for example.

Fan Yang CMT is the Chief Technical Strategist of IBTRADE and FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

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Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes and IBTrade will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.