S&P 500 Futures – Below Trendline before US Open. 1,600 Critical.

Daily Chart

S&P 500 traded lower yesterday, closing at 1,612.52. However, bears were not done, with Futures continue to trade lower during off-market hours, sending price below 1,600 at one point. Price has since recovered slightly, trading just above 1,600, but overall bearishness still remains with the ascending Channel Bottom broken.

One major reason price is so bearish right now is due to the sell-off in Nikkei 225, which pulled MSCI Asia-Pacific index (MXAP:IND) to fresh 2013 lows. Korean Kospi close 1.42% lower, Hang Seng 2.19% while Shanghai and Shen Zhen closed further down at 2.74% and 2.87% respectively. Looking across Europe, stocks are feeling the heat right now with Germany DAX at -1.95%, FTSE at -1.28% while Stoxx50 at -1.53%. It seems that Major Stock Indices are down between 1 – 2.5%. If US Stocks were to suffer the same fate when open, we should be S&P 500 to be closer to 1,595 based on a 1% drop or perhaps even 1,570 based on a 2.5% drop. All these point to a bleak day for US stock today, and we could be on our way to a bearish breakout.

However, it is worth noting that US stocks have been slightly more robust then its global counterparts recently. As such, an estimate of a 1.0 – 2.5% fall today may be considered too aggressive. Furthermore, Stochastic readings are reaching oversold region, which puts some doubts on the viability of a strong bearish follow-through on this breakout. Traders will do well to keep track of price action for the next 2 days as this may be the onset of longer bearish correction or a continuation of current uptrend if a rebound into the Channel is established.

More Links:
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NZD/USD – RBNZ Holds Rate, Multi-Year trendline back in focus

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