Trade of the week: short S&P 500
After six consecutive weeks of rising prices and a near 12% gain in little over a month, the S&P 500 might be over-extended, at least in the short-term.
Since negative divergence can be spotted on the daily Relative Strength Index (RSI) ahead of US inflation data and this week’s FOMC meeting, a correction lower may soon be seen. We would thus like to short the S&P 500 around the 4,600 mark with a downside target around 4,500 and a stop-loss at 4,640 on a daily chart closing basis.
(AI Video Summary)
Outcome of soybeans and sugar futures
In the past two weeks, there have been two trades discussed. One trade involved betting that soybeans would decrease in value, but although they haven't fallen as much as predicted, they are still declining. It would be wise to consider cashing in profits or setting a take profit just above Friday's high. The second trade was on sugar futures, with the hope that the price would bounce back after reaching the 200-day moving average. Unfortunately, this trade resulted in a loss as sugar prices continue to drop.
New trade of the week
This week, the focus is on the S&P 500, which has seen a significant rise since October. It recently reached levels last seen in May 2022 and is approaching its July high. However, there are signs that the market may experience a short-term correction or reversal. The relative strength index does not show high readings, indicating negative divergence and suggesting a possible counter-trend move. Therefore, it is suggested to consider going short on the S&P 500 at around 4,600, with a stop loss set above the March 2022 high at 4,640 on a daily chart closing basis. The target for this trade is around the 4,500 mark.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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