US30 – A correction to be concerned about?

More downside to come?

Equity markets have been struggling to gather upside momentum over the last month and those nerves showed on Monday when the market sold off, leaving investors feeling rather nervous about what lies ahead.

While the move saw the index break significantly below the 55/89-day SMA for the first time in almost a year – it quickly reversed course a couple of times in the interim – it has still only corrected a little over 5% from its highs so it’s too early to worry.

The big test may come very soon, with the 200/233-day SMA falling around 33,000, which roughly coincides with previous areas of support and resistance . A significant move below here could be more concerning.

Should the index rebound off that level, 35,000 will be a major level of interest, falling around the 55/89-day SMA it previously broke below, with a rotation off this level being a bearish confirmation signal.

The Fed will have a big role to play on Wednesday as it announces its September monetary policy decision, alongside its latest projections.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.