Fundamental Forecast for equity indices: Neutral
S&P 500
Last week, was a relatively uneventful one with fundamental catalysts in short supply. This coming week we have the FOMC rate decision on Wednesday, but with expectations set that the Fed will keep rates steady attention will be on any language changes in the policy statement. Yellen has held steady on the hawkish side but with the S&P 500 trading in record territory and even more-so the US Dollar Index selling off to eleven-month lows, markets aren’t taking Yellen and Co. too seriously. Markets will be looking for signaling in regards to the September meeting. (We’ll be covering the FOMC announcement live, you can sign up here to join.) Other ‘high’ impact data for the week include Durable Goods Orders and Advance Goods Trade Balance on Thursday and then Q2 GDP on Friday. For details, please see the economic calendar.
Technically speaking, the market is suspended in air between record highs at the November slope line and the March top-side trend-line it had no issue breaking on through on Wednesday. A small dip back towards the June record high at 2354 or period of consolidation around current levels would do the market some good in being able to gather steam for forging out new record levels later-on. It’s a tough spot from a risk/reward perspective given the lofty levels were at, and without a dip or consolidation we’re left in a position of patience in picking our spots wisely for long entries. As far as being a seller, interest won’t be there until we see strong down-side price action suggesting it’s the new path of least resistance; and even then, we’ll be cautious as sharp down-moves have been bought relatively soon after.
S&P 500: Daily
DAX
Last week brought traders a spat of much-desired volatility in the German index. The ECB made no changes and while Draghi was on the dovish-side the sharp rally by the euro following the ECB sparked a big sell-off in the DAX. More follow-through was seen on Friday as the market clearly doesn’t like the strength we are seeing in the euro. Looking ahead to next week, eyes will be on the Fed and any gyrations they may cause in U.S. equities; if a major move occurs in the S&P on Wednesday look for that volatility to spill over on the open Thursday. The calendar isn’t very heavy, with the only ‘high’ impact data set to be released is German CPI on Friday. See the economic calendar for details.
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