Indices Spread Betting Markets Near Key Resistance Levels
Equity markets have continued to trade in a fairly volatile range over the past weeks, gyrating between their lows and significant resistance levels at or around their 200 day moving averages as well as significant Fibonacci resistance levels.
Moody’s downgrade of Greece to junk status, following on the heels of Standard and Poor’s and Fitch, had been a long time coming but it doesn’t materially change the current environment with respect to what the markets know about Greece and the problems in Europe.
However, given the weaker economic data coming out of Europe and continued concerns about sovereign risk it is hard to imagine anything other than limited upside for stock markets at this time.
In a report released yesterday, French company AXA dismissed the European bailout package as a stop-gap measure which merely delays the break-up of the Euro.
If, as AXA state, a Euro break-up is inevitable the fall-out for the banking sector globally will be keenly felt, which will temper risk appetite.
The main equity markets on both sides of the Atlantic are currently pushing against some key resistance levels on their daily charts.
Starting with the Dow Jones and the S&P 500, both indices are pushing against their 200 day moving averages as well as the 38.2% Fibonacci retracement levels of the down move from the highs to the lows of this year.
The Dow Jones and S&P 500 made significant lows during May and June after posting their highest levels in 20 months during April.
The question being asked by investors now is whether or not this current down move is a correction in the up move since the lows of 2009, or whether it is part of a larger move lower.
Key resistance levels on the Dow Jones is at 10,315, where the 200 day MA sits, and 10,331, which is the 38.2% Fibonacci retracement of the down move from 11,258 April highs to the June lows at 9,758.
For the S&P 500, resistance lies at 1,109.20 which coincides with both the 200 day MA and 38.2% Fibonacci retracement of the down move from the April highs at 1,219.80 to the May lows at 1,040.80.
The price action over the next few days could well give some clues and help answer this question.
One thing is certain over the next few months and years; the sovereign debt issues of western economies will weigh on growth over the next few years and anyone who thinks otherwise is deluding themselves.
The FTSE 100 is also finding it difficult to maintain much in the way of gains above its 38.2% Fibonacci retracement level, at 5,255.20, but even if it does an even bigger obstacle lies in its way at the 200 day moving average at 5,325.
These key resistance levels on all three major indices could well dictate the next move in equity markets. A break and close above these levels would be a significant boost to risk appetite, however, if these levels hold then we could well see a drift back towards the lows seen in recent weeks.
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Article approved by CMC Markets. CMC Markets is authorised and regulated in the UK by the Financial Services Authority, registration no. 173730.
Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
'Indices Spread Betting Markets Near Key Resistance Levels', Feature by D. Jones, last update: 16-Jun-10
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