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S&P 500 - ECB Gyrations Net Zero, Posturing Remains Constructive

S&P 500 - ECB Gyrations Net Zero, Posturing Remains Constructive

Paul Robinson,

What's inside:

-Market found support, shrugged off ECB

-Breadth retreats from overbought while market consolidates, a positive development S&P 500

-1970 level cemented its importance, bullish above

Yesterday was a wild day across markets with the ECB pulling out all the stops and the euro ripping and stocks tanking right in Draghi's face. For an excellent summary of how this unfolded, check out James Stanley’s recap.

Net result of yesterday's gyrations

The end result yesterday in US stocks amounted to essentially a big net 0 when all tallied up. The S&P 500 found support right around the 1970 level we had been talking about, and surged higher during the afternoon to close the day right where it started. What happens in Europe stays in Europe.

Holding up well, overbought conditions alleviated

The extremes in breadth readings mentioned recently as being a short-term negative, but a positive when looking out beyond a few days, have backed off from overbought territory. Which is a good sign considering the indices are effectively consolidating the strong leg up from the February 11 low. The fact the S&P 500 became overbought into stiff resistance around the 2000 level and has yet to peel back lower is very constructive. With a little more time a solid base could take full form, giving the markets a platform from which to break above resistance which has kept a lid on them.

The big levels in need of capturing on a daily closing basis are S&P 500 - 2010 and north of 17100 in the Dow. The Nasdaq 100, as we have been discussing is the laggard, well off its respective resistance levels in the 4450/4500 vicinity, but it will grow legs if the other indices do. A daily close above 4359 should put those upper levels at risk. The 200-day moving averages may present speed bumps, but are not given as much weight as actual price levels. (S&P - 2016, Dow - 17,119, Nasdaq - 4420)

1970 holds even greater importance now

The 1970 level was viewed as the last line of defense for our bullish bias before then having to turn our view southerly. This level prior to yesterday's gyrations was viewed as having a modest amount of importance, but given it held so well on a strong downward thrust further cements its importance. We did break the uptrend line off the Feb 11 low on an intra-day basis, however, on a daily closing daily basis we maintained above. As long as the S&P trades above 1970, then its constructive posturing remains. We may need to wait it out a few more days before upward momentum kicks in, but at this time that is all it seems it will be a matter of - time.

S&P 500 Daily: Sep '15 - Present

If you want to learn how to better execute your trade ideas, check out this guide.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter @PaulRobinsonFX , or email him directly at any questions, comments, or concerns.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.