News and Analysis

Market Update 5/3 – Upside SPX Levels of Note

SPX DAILY

SPX held up after yesterday’s reversal.  There are 2 big levels to note for possible resistance…4250 and 4360/90.  The latter level seems like a stretch in the near term but FOMC is tomorrow and sentiment is wildly bearish, which provides plenty of fuel for a violent squeeze.  Bottom line, I’m thinking higher following yesterday’s reversal, especially after futures held the large volume level during Tuesday’s trade (see below).

5/2 – SPX took out the 2/24 low (invasion low) before reversing higher to finish with a high volume reversal (see below).  The low was right at the median line of the bearish fork too.  Sentiment across virtually all major asset classes is insanely extreme (USD, bonds, and equities).  The median line tag and reversal from under the February low is a perfect setup for a squeeze higher.  If however price breaks below the median line then the market would be in crash territory.

S&P 500 FUTURES (ES) HOURLY

DXY WEEKLY

USD headlines are getting more interesting by the day.  For example, a Bloomberg article today described USD strength as ‘hideous’.  See here. I do wonder if FOMC ends up being a ‘sell the news’ event.  This would manifest in a USD spike and reversal.  Keep and eye on 104.70.

4/28 – DXY is trading at 20 year highs after poking above the 2017 high today.  It’s worth noting that EURUSD has yet to take out its 2017 low so a non-confirmation is present.  The next level to pay attention to is the parallel that crosses the 2020 high near 104.70.  The long term chart is below.  By the way, we identified the 2021 low with a parallel from the same structure.  I didn’t stick with the USD bullish view, which was a mistake.  Historically (as in the last 50 years), inflationary periods have been marked by USD weakness (1970s, 2002-2008 and 2008-2011 commodity booms for example) and deflation by USD strength (financial crisis for example).  We’ve had inflation and a commodity boom and…a USD boom.  I’m not sure how this resolves from a bigger picture perspective but a sizable pullback in order to at least relieve momentum readings and reset short term sentiment seems likely.

AUDUSD DAILY

AUDUSD has yet to take out the Jan low but NZDUSD has taken out its Jan low.  So, there is a non-confirmation in place.  It’s not worth acting on until we get signs of a reversal.  Until/if that happens, be aware of the parallel within the long term channel (close up view below) for support near .6990.

AUDUSD DAILY

NZDUSD DAILY

NZDUSD has traded into a well-defined zone from a long term horiztonal level at .6430 and the line that crosses big lows in 2021 and 2022.  The 50% retrace of the rally from the 2020 low is just below at .6389.  Keep that level in mind for a spike and reversal on FOMC.

USDCAD DAILY

USDCAD action since the 2021 low looks like an A wave up followed by a sideways B wave.  The implication is that price dips before breaking higher in wave C.  Near term, 1.2680 or so is well-defined for possible support.  1.3000ish remains massive and nowincludes VWAP from the 2020 high.