US Market Roundup – Rally on Bad News again

US stock continue the rise yesterday, after yet more bad news similar to the day before. This time round the culprit was the Initial Jobless Claims, which came in at 346K, slightly higher than the expected 345K, with previous week’s data revised higher to 355K. Market apparently loved the worse than expected data, with US stocks rallying immediately on the news. To be fair, the immediate rally wasn’t really astronomical, with S&P 500 gaining 2.5 points within after 5 mins and Dow 30 clocking less than 25 points higher. Nonetheless, both indexes went on to further gains, closing in at 0.62% and 0.77% respectively, suggesting that the early gains did have some impact to fuel overall bullish sentiment, or at the very least, did no harm to the overall bullish sentiment spilling over from yesterday. This enhances the assertion that market is looking out for bearish US economic numbers to rub Bernanke’s nose in, believing that he will not be forced to retract his QE3 tapering timeline.

S&P 500 Hourly Chart


From a technical perspective, price is still trading within the rising Channel, claiming back a hug chunk of losses incurred after Bernanke’s unfortunate speech. However, were are still a fair distance away from truly banishing the hoodoo of last Wed’s decline. Nonetheless, Stochastic readings are looking likely to form a trough just around the 50.0 mark, suggesting that a test of the resistance around 1,618 would be possible, and even open up the possibility of a break higher should an interim bullish stoch cycle is confirmed.

Dow 30 Hourly Chart


Dow remains more bullish than S&P 500, maintaining the break above current rising Channel. Furthermore, current potential stoch trough is slightly higher than the one recently formed, which puts it in a slightly more bullish position compared to S&P 500. Nonetheless, Dow 30 is also facing a similar resistance before a stronger recovery back towards pre FOMC levels can be tested, and it is likely that both indices will face Overbought scenarios when the critical push into pre FOMC levels are reached.

Given the fact that today is the final day of trading for both the week and month, there is definitely elements of profit taking, winding down of positions from the shorts taken previously. As such, even if price clear the pre FOMC levels, we need to check if the bullish behaviors is evidence on the first week of July. If price fail to make any bullish move today, the likelihood of price reversing lower for the month of July increases which may result in the unwinding of current week rally.

More Links:
EUR/USD Technicals – Reduced risk of 1.30 breaking (for now)
Gold Technicals – Moving Back towards 1,200
GBP/USD – Further Sharp Losses as UK Current Account Falters

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