We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
Oil - US Crude
Bearish
Wall Street
Bullish
Gold
Bullish
GBP/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bearish
More View more
Breaking news

Chinese PMI Data Beats Estimates. Manufacturing 52.0, Est 44.8, Non-Manufacturing: 52.3, Est 42.0

Real Time News
  • [corr] #CrudeOil prices rise over 7% in Asia trade in the aftermath of rosy March China PMI data - https://t.co/8WXEO5C3Qx
  • - #GBPNZD trading below multi-month uptrend: capitulation or break through ahead? - #NZDCAD recovery from seven-year low may be capped as pair heads to resistance - #NZDCHF bouncing back after enduring double digit selloff, weakest rate on record https://www.dailyfx.com/forex/technical/article/special_report/2020/03/31/New-Zealand-Dollar-Technical-Analysis-GBPNZD-NZDCAD-NZDCHF.html
  • #CrudeOil prices rise over 7% in Asia trade in the aftermath of rosy March China PMI data - https://t.co/3hvZXv4xij
  • My trading video for today: '#Dow and S&P 500 Slow Advance a Best Outcome, G7 and Chinese PMI Ahead' https://www.dailyfx.com/forex/video/daily_news_report/2020/03/31/Dow-and-SP-500-Slow-Advance-a-Best-Outcome-G7-and-Chinese-PMI-Ahead.html?ref-author=Kicklighter&QPID=917719&CHID=9 https://t.co/JFyPe0UWjq
  • Foreign exchange – or “#forex” – markets often pay close attention to politics and central bank policy. We offer a model for traders to gauge their impact on exchange rates. Get your market insight from @ZabelinDimitri and @CVecchioFX here: https://t.co/FbXc1Awu6a https://t.co/IZlYdXrnLm
  • Commodities Update: As of 02:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 6.93% Silver: 0.73% Gold: -0.41% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/wMbZni4GxM
  • "However, this downgrade may be the canary in the coalmine for other emerging market economies that may spread to their OECD counterparts" https://www.dailyfx.com/forex/fundamental/article/special_report/2020/03/30/Euro-May-Rise-on-ESM-Crude-Oil-Selloff-Deepens-on-OPEC-Price-War.html
  • You can't see it, but I have a seriously dubious look on my face https://t.co/vOEfdaHwyg
  • Forex Update: As of 02:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.18% 🇦🇺AUD: -0.13% 🇨🇦CAD: -0.22% 🇪🇺EUR: -0.27% 🇬🇧GBP: -0.69% 🇯🇵JPY: -0.70% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/XyAyUgqavm
  • LIVE NOW! APAC Head Strategist @IlyaSpivak discusses the technical and fundamental $AUDUSD outlook for the week ahead here - https://www.dailyfx.com/webinars/378612179?CHID=9&QPID=917720&utm_source=Twitter&utm_medium=DFXGeneric&utm_campaign=twr
S&P 500, Dow and Risk: Reversal; Pause or Indecision

S&P 500, Dow and Risk: Reversal; Pause or Indecision

2020-03-26 03:30:00
John Kicklighter, Chief Strategist
Share:

Dow and S&P 500 Talking Points:

  • Risk benchmarks rose for the second consecutive session – the first time the markets have earned a back-to-back advance since February 6th
  • Though US indices would retreat from highs, the Dow’s 14.8% and S&P 500 10.6% rallies were the biggest two-day moves since 1987
  • Top event risk is over the next 24 hours is unexpectedly the US initial jobless claims for its timeliness rather than its broad scope

The Hope In Their Eyes

There was a broad rebound in risk-leaning assets – and commensurate retreat in havens – this past session. The favorable wind for sentiment did not find deep systemic traction, which ultimately marred the enthusiasm that could have taken traction; but most market participants are nevertheless happy for any reprieve at this stage. Sentiment took traction across the market, but there are few places where the speculative traction is more significant than with the US indices. The Dow and S&P 500 would put in for a relatively restrained close-to-close advance, but it was nevertheless a rally. That represents the first back-to-back climb for these benchmarks since February 6th. What’s more, the 2-day rate of change over this period was the most impressive since the period that followed the 1987 crash.

US 500 BULLISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -3% 20% 13%
Weekly -42% 166% 36%
What does it mean for price action?
Get My Guide

Chart of S&P 500 with 2-Day Rate of Change (Daily)

S&P 500, Dow and Risk: Reversal; Pause or Indecision

Chart Created on Tradingview Platform

A two-day climb of such magnitude will naturally draw a lot of attention from the long-only crowd that is seeking a handhold for hope. It goes without saying, hope is not a strategy. Risk appetite has been driven by anticipation of the next step in a steadfast global stimulus escalation. The United States Congress supposedly approved a coronavirus stimulus program worth more than $2 trillion, however, by Wednesday’s close, the details were still up in the air. Expectations were playing a critical role in this performance, and the reality of an impending recession represents an oppressive reality to fend off. Eventually, the details will be settled on this program and then investor sentiment will have its say. While it is not a universal, the truism to ‘buy the rumor and sell the news’ has some grounding historically. The wave of global stimulus has been unprecedented, but it faces an unprecedented economic contraction. In a war of sentiment, the response comes in a single volley while the reminders of economic pain will come on a near daily basis. How will investor confidence weather this situation?

Poll from Twitter on White House Strategy with Virus and Economy

S&P 500, Dow and Risk: Reversal; Pause or Indecision

From Twitter Handle @JohnKicklighter

Volatility Is Directing My Decision Making, Should it Yours?

In evaluating the market’s next moves, most traders and analysts will apply their preferred market evaluation tools. That said, fundamentals and technicals register as unreliable to me. On the fundamental side, we have very early signs of economic traction in updates on stimulus but the reality of an economic contraction measured in the next two months of data puts the onus on qualitative rather than quantitative factors. On the chart side, levels look ephemeral whether based on horizontal ‘zones’, trendlines or calculated measures. Momentum overrules it all and such pacing is a factor of volatility.

Chart of the Dow with its 10-Day ATR Overlaid with the VIX Volatility Index (Daily)

S&P 500, Dow and Risk: Reversal; Pause or Indecision

Chart Created on Tradingview Platform

Volatility by its very definition is uncertainty. Whether referencing implied measures of volatility (like the VIX) or realized volatility (like a market’s ATR), activity levels are exceptionally high. Most consider this just a gauge of pacing, but the higher probability of sudden changes in direction is another feature of this sort of landscape. To commit to a recovery in this convoluted fundamental backdrop is exceptionally risky. To presume a revived bear trend presumes timing founded on unpredictable sentiment. My approach to such situations is to shorten my time frame and be more responsive. Rather than to presume to project popular opinion, I try to remain more responsive to a naturally indecisive world.

Top Event Risk May Not Be What You Expect

Looking ahead to the next 24 hours, there are some high-profile events that we can seize upon – not to mention systemically important questions floating in the collective conscious. That said, I believe the most loaded update we have on tap is the typically innocuous initial jobless claims out of the US. The last time I consider such a weekly US figure – the MBA mortgage applications – a systemically important update was back in the height of the 2008 financial crisis owing to the implosion of the US subprime housing crisis. This time around, the health of the US labor market is exceptionally important owing to the shutdown of the US (and the global) economy which will lead inevitably to mass job losses. That in turn raises the profile dramatically of the typical, lowly US jobless claims. This is the figure that will account to that swell most immediately. Beware the impact this update is likely to have.

Chart of US 10 Year to 3-Month Treasury Curve Over US Initial Jobless Claims (Monthly)

S&P 500, Dow and Risk: Reversal; Pause or Indecision

Chart Created on Tradingview Platform

Across the rest of the docket, there are a few other indicators that should be monitored. Sentiment-based measures are particularly high on my list with the Bloomberg economist survey for China, Germany’s consumer confidence figure and the ECB’s economic bulletin. Outside of this list, monetary policy has a few highlights, but it is the Bank of Mexico rate decision that is highest on my list. That is not a gauge of what this group is expected to do, but rather the implications of the financial downturn – and strong Dollar – on the emerging market economy. Watch USDMXN closely if you are not already.

Chart of USDMXN (Daily)

S&P 500, Dow and Risk: Reversal; Pause or Indecision

Chart Created on Tradingview Platform

Building Confidence in Trading
Building Confidence in Trading
Recommended by John Kicklighter
Building Confidence in Trading
Get My Guide

If you want to download my Manic-Crisis calendar, you can find the updated file here.

.

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

DISCLOSURES

News & Analysis at your fingertips.