S&P 500 supported after China rebound

<p>S&P 500 (daily chart shown below) futures rose sharply in pre-market trading on Thursday after the Asian session showed a broad-based rally following Wednesday’s plunge. […]</p>

S&P 500 (daily chart shown below) futures rose sharply in pre-market trading on Thursday after the Asian session showed a broad-based rally following Wednesday’s plunge. The Shanghai Composite closed up nearly 5.8%, showing its greatest one-day percentage increase since 2009. The Hang Seng and Nikkei indices also rebounded, though not as dramatically.

Asia’s rally has tentatively helped fuel substantial rebounds in European equities, including the DAX and FTSE, as well as US equities and crude oil.

In the case of the S&P 500, the index found major support this week around the 2033 level, which has been tested or approached to the downside on most days this week as China equity markets and Greece continued to weigh on the index. This key 2033 level was also tested and well-respected twice back in late March.

S&P 500 Daily Chart


From a broader perspective, the S&P 500 is still firmly entrenched within a long-term uptrend. The index reached a new all-time high of 2134 as recently as May of this year. Since that high, the S&P has pulled back modestly but is currently far from entering into correction territory, normally defined as a pullback of 10% or more.

While this may currently be true, and the China equities markets may have been rescued for the moment by state policy and controls, further turmoil in those markets could well re-emerge. In this event, European and US indices could likely follow suit.

For the S&P 500, the key downside support level to watch remains at the noted 2033 level. Any subsequent break below that level should target further downside support objectives at the 2000 psychological level followed by key support around 1975.

To the upside, on any continued China market recovery, sustained trading above the 200-day moving average for the S&P 500 could push the index towards a re-test of 2130-area resistance.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.