SP500 – all eyes on mid-terms
Last week stock markets optimism suddenly reversed on Friday after jobs and wage report. It was combination of Trump’s encouragement tweets gone futile and no confirmed deal with Chinese. Whatever the reason is, “ours is not the reason why, ours is to sell or buy”. Now, daily charts formed almost perfect reverse candle configuration. I am a bit skeptical about kind of magic that candlesticks make, but this one is very tough to ignore.
Morning started on a risk-off mode in Asia and currently as I am writing this, soft tone also spread on European markets. Trading is all about probabilities. Many traders consider current price as an opportunity to buy in anticipation that correction is over. I am still not convinced.
All eyes, of course, is on USA mid-terms and this one will probably make a major impact on markets. Until election results are clear, I would refrain from entering any longs. I believe rally may happen (or may be not) only if Republicans retain their majority.
Above Daily chart, however, makes me even more cautious about longs. This is a typical continuation setup and I will watch closely the critical resistance level 2765 – which looks rather strong and sloped downwards. Price will probably try to re-test it today or tomorrow but if it fails, then another leg down is almost imminent. Support 2690 is also a litmus test – if price break below and confirms this break, then it is a strong sell signal.
Weekly charts makes it even more obvious. For a long-term traders it is a perfect setup to sell from current levels and additionally adding to sells around 2760 with stops above 2765.
This is a very good risk-reward pattern.
Have a nice week ahead and safe trades !