S&P 500 Technical Analysis: Bottoming Below 1900 Figure?

Talking Points:

• S&P 500 Inverted Hammer Candlestick Hints at Ebbing Momentum
• Intraday Price Dynamics Hint Renewed Selling is Probably Ahead

The S&P 500 declined for a sixth consecutive day, making for the worst losing streak since 2012, but downward momentum has slowed below the 1800.00 figure. The latest daily candle appears to have formed an Inverted Hammer candlestick. The setup is indicative of indecision and may hint at ebbing bearish pressure, which could precede a reversal higher.

Importantly, the candle could just as well represent a pause before another push lower, with the difference imperceptible until further confirmation emerges. In fact, an important argument in favor of the downside emerges from the very dynamics that lead to the Hammer candle’s formation. Prices soared intraday after China delivered a much-anticipated dose of monetary stimulus but optimism faded into the end of the session, with the negative daily close taking shape in the final hours of trade. Prices’ inability to rally on support news is typically telling of deep-seeded underlying weakness, warning of losses ahead.

KEY UPCOMING EVENT RISK:

26 AUG 2015, 12:30 GMT – US Durable Goods Orders (JUL) – Expected: -0.4%, Prev: 3.4%

27 AUG 2015, 12:30 GMT – US GDP (Annualized) (2Q S) – Expected: 3.2%, Prev: 2.3%

28 AUG 2015, 05:45 GMT – Swiss GDP (QoQ) (2Q) – Expected: -0.1%, Prev: -0.2%

28 AUG 2015, 05:45 GMT – UK GDP (QoQ) (2Q P) – Expected: 0.7%, Prev: 0.7%

28 AUG 2015, 12:30 GMT – US Core PCE (YoY) (JUL) – Expected: 1.3%, Prev: 1.3%

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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