After spending three months riding a bullish trend-line up to fresh all-time-highs, the S&P 500 has finally broken the chain and we’re now seeing some bearish push develop. The area that we had followed for higher-low support plays in the last week of September had held up well as higher-low support up until Wednesday of this week. But as the pullback has deepened, prices have dropped down to a deeper level of support that we’d previously used earlier in September to position-in to bullish plays, and this zone runs around 2880.
The key takeaway here is that the S&P is working on lower-lows and lower-highs, and this may not be the time to push the bullish stance in the index. This doesn’t yet obviate the bullish trend in the S&P 500, but timing that approach will be key – and traders will likely want to wait for some confirmed element of support before looking to take on risk with bullish continuation strategies. Deeper support potential exists around 2860, 2845 and then again at 2824. If we take out 2824, something in the backdrop has shifted, and the bullish stance should come into question as something new will likely be getting priced-in at that point.
Technical Forecast for the S&P 500: Neutral
· European markets opened slightly lower on Monday morning, following broad declines in Asia after China's central bank cut reserve requirements for banks.
The pan-European Stoxx 600 was down around 0.15 percent shortly after the opening bell, with most sectors and major bourses in negative territory.
· Shares in Asia slumped Monday as China’s markets stumbled in their first trading day after a one-week holiday even though Beijing’s central bank increased liquidity to offset the impact of an escalating trade dispute with the United States.
Asian shares were also hit on Monday as investors in Chinese stocks reacted for the first time to new pressure from Washington and a report that Chinese spies had compromised U.S. hardware.
At 0540 GMT, China’s blue-chip CSI300 index was 3.5 percent lower while the main Shanghai Composite Index was down 2.9 percent. The tech-heavy ChiNext board fell 3.08 percent.
The losses in China dragged down MSCI’s broadest index of Asia-Pacific shares outside Japan, which was 0.9 percent lower.
· China’s services sector grew at its fastest clip in three months in September on improved demand, a private survey showed on Monday, though sentiment worsened as firms started shedding jobs after over two years of expansion while rising cost pressures pointed to a squeeze on profit margins.
The Caixin/Markit services purchasing managers’ index (PMI) rose to 53.1 in September from 51.5 in August, and staying above the 50 level that separates growth from contraction.
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