S&P 500 Futures – Uptrend continues though 1,600 break remains in doubt

S&P 500 closed at record highs yesterday despite continued disappointing economic data from the US. Personal Consumption Core Expenditure came in at 1.1%, slightly below the 1.2% expectations. Pending Home Sales came in 0.3% below expectations of 6.1%, and Dallas Fed Manufacturing Activity came in at -15.6 vs 5.0 expected. All these missed expectations add more woes to last Friday’s GDP release, but stocks are having none of that, with bulls continue to press harder than before, sending price higher towards 1,600 mark.

It seems that traders were getting less fazed by US fundamentals, but turned their eyes across the Atlantic onto Europe. Italy had just managed to stabilize their new Government by electing a new Prime Minister, who has won a confidence vote to secure his seat. Market liked what they see, with Italian bonds auction on the same day clinching lowest yields since Oct 2010. The same feel-good factor pushed futures prices higher before US market open, and propelled prices above 26th April High when the bell rung.

Hourly Chart

On 2nd look, some of the data from US last night wasn’t that bad either. Despite missing expectations, Pending Home Sales reached a 3 year high nonetheless. Core Expenditures may have increased lower than expected, but it is still a good indication that inflation risks aren’t there – something that Fed will be delighted to see. This allow prices to stay afloat along the 1,590 ranges despite bouncing from the rising Channel Top. Stochastic indicator also shows that price should be undergoing a bear cycle right now, which would suggest that a move towards Channel bottom possible. Hence the inability to break 1,590 is testament to current bull strength.

Daily Chart

The job is far from done for bulls though, prices yesterday has failed to reach an all time high which was forged back 2 weeks ago. However, only the brave or the stupid (or both) would bet against price re-testing the all time high once more. Whether price can break the all time high is another issue altogether though. Stoch readings are already inside the Overbought region, suggesting that current rally from 18th Apr low may be overextending itself. Without any strong fundamental reasons to provide the push, bulls may find it hard to break above 1,600 easily.

More Links:
USD/JPY – Lowest Jobless Rate Since 2008
GBP/USD – After Ten Week High, Eases Back Under 1.55
NZD/USD Technicals – Rally towards 0.868 back on track

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