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 Thursday 27 October 2016

US stock indices still range-bound

 

 

As the chart below shows, the index of the 500 biggest US companies by market capitalisation has been stuck in a relatively narrow range since mid-summer. Resistance comes in around 2,180 with support near 2,120.

1

It’s a similar story for the Dow Jones Industrial Average. Support comes in around 18,000 with the first area of significant resistance near 18,400. If that breaks then the next upside target comes in around 18,600 – which roughly corresponds to the all-time high hit earlier this summer.

2

A number of notable hedge fund managers have been warning that US equities are looking overvalued and a downside correction could be coming. There’s no doubt that this could be holding back investors. But there are plenty of other hurdles to jump as investors decide whether to carry on climbing the “wall of worry.”

Next week the third quarter earnings season hits its peak, we have central bank meetings from the Reserve Bank of Australia, Bank of Japan, US Federal Reserve and Bank of England, and the week is rounded off by the release of US non-Farm Payrolls for October. Despite all this, it looks as if the Dow and S&P500 will keep within their trading ranges for now. It seems unlikely that investors will want to push prices too far one way or another until they know the outcome of the US Presidential Election and have greater clarity over the timing of future Fed rate hikes.

But once all that is out of the way we should prepare for a break-out. What remains unclear is whether this will be a corrective break to the downside, or a continuation of the upside trend that’s been in place since early 2009.

3


David: It seems unlikely that investors will want to push prices too far one way or another until they know the outcome of the US Presidential Election and have greater clarity over the timing of future Fed rate hikes.

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Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Category: PM Bulletin


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