Chart of the day NYSE FANG+ Index at key support with USD/JPY not showing signs of major risk off

A break below the 200-day moving average does not necessary translates to the start of a primary bear market for the S&P 500.

Key observations

  • Yesterday (02 Apr) 2% drop seen in the benchmark U.S. S&P 500 Index has led it to breach briefly below a key 200-day moving average that has managed to stall the previous decline on 09 Feb 2018. A break below the 200-day moving average does not necessary translates to the start of a primary bear market for the S&P 500 as we need to analyse other factors.
  • The main driver of the rout in the U.S. stock market is triggered by the high beta and momentum driven technology stocks that have outperformed the S&P 500 in the last three years. A gauge on the performance of such stocks can be viewed from the NYSE FANG+ Index (FANGs plus Alibaba, Baidu, NVIDIA, Tesla & Twitter). As seen from the first chart, the NYSE FANG+ Index is still holding above a key last line of defence at 2334/2300 (the major ascending channel support from Feb 2016 low & 23.6% Fibonacci retracement of the primary uptrend from Feb 2016 to its current all-time high of 2789.
  • Another other asset class, the USD/JPY that tends to be sensitive to major risk off environment/events where the currency pair will move in direct tandem with the general movement of global equities. Interestingly, the slide in the USD/JPY seen in yesterday’s U.S. session has managed to stall right at the 105.65 pull-back support of a former “Descending Wedge” resistance that has been broken to the upside on 28 Mar 2018 with positive momentum reading as observed from its daily RSI oscillator. Also, a “Descending Wedge” configuration tends to form at the end of a downtrend which represents a potential reversal in sentiment from negative to positive. Based on intermarket analysis, a further rebound from the 105.65 support shall stabilise the recent rout seen in the S&P 500 (refer to daily chart of USD/JPY).  
  • Therefore as long as the NYSE FANG+ Index and USD/JPY manages to hold their respective supports at 2334/2300 and 105.65, there is still a chance for the S&P 500 to stage a recovery from its 2585 key medium-term support within a “triangle range” configuration and deemed yesterday’s movement as a “noise”.  

Charts are from eSignal

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