Pullback Gathers Momentum
Oliver Gordon | May 23, 2018 10:30
Originally published by Rivkin Securities
US equities sold off into the close, to end the trading session lower on Tuesday, with the S&P 500 Index declining 8.57 points (-0.31%) to close at 2724.44. The Nasdaq Composite was down 15.58 points (-0.21%) to end the session at 7378.46. Part of the weakness seemed to be related to comments made by President Trump regarding the upcoming meeting he is due to have with Kim Jong Un, the leader of North Korea, on June 12 in Singapore.
The weekly chart below is of the S&P 500 Index since 2015. From a technical perspective, the sharp decline experienced in February 2018, has given way to a choppy sideways range. At this stage, it is unclear whether this period of consolidation is merely a pause in the longer-term uptrend, from which the price will break up, or if this is a topping pattern, from which the price will move lower and reverse the longer-term trend. What we can do is identify the key price levels, which will give confirmation either way. In terms of key support, we have highlighted the range between 2600 and 2550, marked from recent major lows and the rising trendline. It would take a break below this region to confirm a topping pattern and change in the broader trend to down. Alternatively, a break above the 2800 level would likely lead to a continuation of the trend and a push to new all-time highs.
h2 S&P500 – Weekly Chart/h2The S&P/ASX 200 was one of the worst performing markets on Tuesday, with the ASX200 declining 42.62 points (-0.70%) to close at 6041.87. Financial stocks continue to weigh on the broader market, with ANZ (AX:ANZ) the worst performer of the big banks on Tuesday, declining 1.60%. With the Royal Commission into the banking sector resuming public hearings this week, the public scrutiny continues to act as a major headwind.
The Aussie dollar was slightly weaker, with the AUD/USD spot rate closing in New York at 0.7575, down 8 pips on the prior day, while commodity prices were stronger, with the CRB Index gaining 0.25%. The WTI crude oil is currently trading at around US$72 a barrel, while spot gold prices are at US$1291.60 an oz.
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