US Stocks rallied once more, with S&P 500 gaining 0.73%, extending the stock index consecutive gains to 6 days. This is certainly an impressive run, but it seems that Dow 30 is performing better. It seems that the observation made yesterday that the Dow is starting to outshine its more bullish twin was spot on, with the Industrial index gaining 0.85%. That being said, unless you are interested in the spread play between the 2 indexes, this new development can be simply be thrown into the trivial bin. Broad trend wise, US traders are continuing to be bullish despite no major fundamental push. The only scheduled news release yesterday was NFIB Small Business Optimism and JOLTs Job Openings, both of which were below expectations. Nonetheless, US traders weren’t running on empty, as we did have other news releases from China earlier – with Industrial Production and Retail Sales both coming in better than expected. However, that news should already have been discounted during early European hours when the news was released, as a sharp bullish push already occurred. Hence, there must still be some element of bullish overreaction remaining in US traders, which may once again provide bullish pressure for today’s trade as there isn’t anything noteworthy in terms of upcoming scheduled news releases.
S&P 500 Hourly Chart
From current price action, we can also see that Asian traders are remaining more prudish compared to their US counterparts. S&P 500 has since pushed out of the narrowing wedge and is floating on limbo above the 1,680 support. Another proof that Asian traders are not as bullish can be seen from the small wick higher of current candle. This miniature rally was spurred by Obama’s speech to US which indicated that he is putting in “double efforts” on the diplomatic front for the Syrian issue, and have postponed Congress vote in order to facilitate the diplomatic negotiations. This should have been a great news for Stocks, but S&P 500 Futures barely moved. On the other hand, Gold prices went down sharply during the same period, showing us the missed bullish opportunity earlier.
Technically speaking, Stochastic suggest that we are currently in a bearish cycle. However Stoch levels should ideally break below the 55.0 – 60.0 barrier in order to confirm that this is not just a shallow dip. This is especially important as we are still within an uptrend with US session expected to be bullish as well. There is a chance that US traders may once again overreact to the non-war scenario and hence upside risks looms.
Dow 30 Hourly Chart
Dow 30 remains more bullish than S&P 500, with price action staying within the rising wedge. Stochastic readings are also less bearish with the Stoch curve looking to use the 80.0 key level to rebound higher. As Dow has become the more bullish one, should S&P 500 climb back up within the wedge, the chances of new highs for Dow increases. Similarly, should Dow 30 breaks lower from the wedge, expect S&P 500 to break the 1,680 support for a bearish move back towards 1,650.
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