Stocks reverse while yields hammer out a bottom

What is the catalyst that will help stocks to continue to move higher and bonds move lower (yields higher)?

U Turn 1

Turnaround Tuesday strikes again!  Stocks reversed course today and are up nearly 1.75%  as the S&P 500 traded above yesterday’s highs, near 4328.  Just as we have seen several times since the large index began forming the rising wedge in the fall of 2020, a large selloff one day as been followed by a larger positive move the next day. Today’s move resembles that of June 22nd, when price reversed the previous day’s selloff and continued moving higher within the wedge.   The key for the S&P 500 will be to see if the index can close back into the wedge and make new highs, just as it has been doing for the last 9 months.  However, if the index fails and closes below the July 19th lows and horizontal support, it can easily move to the June 21st lows of 4252.75. 

Source: Tradingview, City Index

S&P 500 trading guide

The candlestick formation on a daily chart of 10-year yields is a hammer formation, in which yields open near yesterday’s close, make a new low, and recover to close near the highs of the day.  A hammer is a one candle reversal signal.  The benchmark yields moved as lows as 1.129 today before reversing, as it struggles to hold a key level near horizontal support at 1.200 and the 38.2% Fibonacci retracement level from the March 9th, 2020 lows to the March 30, 2021 highs near 1.227.  Monday’s highs provide first resistance at 1.2900, ahead of horizontal resistance at 1.423.  Support below Tuesday’s low is the 50% retracement level from the previously mentioned timeframe near 1.056 and then the psychological round number support level of 1.000. Notice that yields in a new low today while the RSI did not!

 Source: Tradingview, City Index

Japanese candlestick cheatsheet

If the S&P 500 is going to continue to move higher, its going to have to take out trendline resistance and make new all-time highs.  The hammer in yields confirms the move higher in stocks today.  The question traders need to be asking right now is: What is the catalyst that will help stocks to continue to move higher and bonds move lower (yields higher)?

Learn more about index trading opportunities.


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.