S&P500 Eyes Record Highs, Nikkei Appears Less Confident

Trade tensions are thawing, Trump and Xi are besties again, and risk appetite is being allowed to blossom as a result.

Trade tensions are thawing, Trump and Xi are besties again, allowing risk assets to rally as a result.  Still, some appear more bullish than others...


The S&P500 has record highs within easy reach and momentum suggests we could test this key milestone over by the end of the week. The breakout from range was seen on a gap high. That is hasn’t been filled is another sign as strength, as such a move is considered to be a breakaway gap, which tends to occur at the beginning of a move after leaving a basing pattern.

  • A small bullish doji marks the swing low at 2,957. As the gap has not been filled, we remain bullish above the structural low.
  • The S&P500 closed just above the 3k milestone but, due to the positive sentiment across markets, we expect it to re-test the record highs this week (and possibly even today). There’s also no bearish divergence with RSI, and it hasn’t reached overbought on the four-hour chart.
  • As this is such a key level, it’s plausible to expect a price reaction triggered by profit taking. Yet the bullish structure assumes an eventual break higher and for 2,957 to remain untested ahead of the breakout.
  • We’d keep an open target at new highs and trail a stop accordingly.


The FTSE 100 came close to breaking 7,400, although there’s no cigar yet. The index has crept back from yesterday’s high in early trade, but if it can hold above the 7,300 area then perhaps a breakout is imminent. A tad on the messy side, but there’s a pattern reminiscent of an inverted head and shoulders. However, the FTSE is mostly being propped up by a global shift in sentiment and recent gains have failed to keep up with ay of its peers (such as the DAX), so we suspect upside may be limited.

  • Look for 7,300 to support to hold ahead of a break above 7,400. The internal trendline can be used as an interim target.
  • As FTSE has lagged its peers, we’re bullish near-term but cautions further out.
  • A break below 7,200 invalidates the near-term bullish bias.


The Nikki has broken the bearish trendline from the September high, trades just beneath the July highs. As it trades just near a resistance level, it entices the potential for a pullback. However, the probability of a retracement appears highs because USD/JPY and the US2-JP2 yr yield differentials have also tested their bearish trendlines.

  • Counter-trend trades could look to fade into minor rallies beneath 2,185, and seek a target around the broken trendline
  • Bulls could seek to buy a dip once a new level of support has been established.
  • Alternatively, bulls could look to wait for a break above 2,185 before entering long, especially if we see US indices break to new highs (along with USD/JPY and the US2-JP2 differential.


Related analysis:
Nasdaq bounce shoves aside value ‘comeback’
DJIA: Record Highs in Sight After Better-Than-Expected Q2 Earnings Season
With Trade Talks Back On The Menu, Indices Rise For The Occasion | S&P500, DAX
Index Pairs Matrix | Ratio Performance At A Glance

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.