S&P 500 – 3 Black Crows seen on Weekly

Stocks have taken a beating recently after US economy showed its weak underbelly with a weaker than expected GDP growth (2.4% vs 2.5% expected) and a shrinking Manufacturing Sector (ISM PMI 49.0 vs 50.7 expected). To compound matters, speculations on Fed tapering QE purchases soon started to gain traction once more, pushing investors to relinquish their stock positions while they still can, especially if they are currently in profit.

Weekly Chart


With only 2 more trading days left this week, there is a high chance that price may be able to form the 3 Black Crows bearish reversal pattern. Price already formed an “Evening Star” bearish reversal last week, and this week’s loss can also be considered as an extension/confirmation of the Evening Star pattern. Furthermore, current price is trading just below the 23.6% Fib Retracement, which opens up the next level 38.2% Fib which happens to be the confluence with the consolidation range back in April 2013. Stochastic readings show that a bear cycle is also just starting to gain momentum, with readings pushing below 80.0, adding weight to the case for a bearish reversal from here out.

Hourly Chart


Hourly Chart is also highly bearish, with price finding some support in the form of the descending Channel Bottom, but bearish pressure will continue to remain as long as the 23.6% Fib is not cleared. Stochastic suggest that price may not be able to break too many resistances from here with readings already hitting Overbought, even if price manage to clear 23.6% Fib, the ability to clear 1,625 interim support just slightly higher is in serious doubt, and will put bears back in charge seeking Channel Bottom if bulls fail to conquer the aforementioned level.

With NFP coming tomorrow, stocks are stuck in a no-win situation. If NFP data is good, the rumor mill regarding a tapering of QE will run even faster, sending stocks lower. If NFP data is bad, overall bearish pressure may also push price downs with bears seeking excuses to sell. Nonetheless, with European stocks trading marginally higher today, there may be a chance that US stocks may recover from yesterday’s sharp decline. If price does recover, then perhaps we may be in a better position to react to the NFP data on Friday.

More Links:
Nikkei 225 Technicals – 13,000 holding on technical rebound
GBP/USD – Moves to Four Week High at 1.54
EUR/USD – Meeting Stiff Resistance at 1.31

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu