Summary:
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US stock benchmarks slightly higher
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US500 shows possible reversal signs but US2000 remains strong
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Wall Street closed for labour day
US stock indices have begun the week in a fairly quiet fashion, with some small gains seen in the three largest benchmarks. The US500 is back above the 2900 level after flirting with a move lower on Friday while the US100 also trades less than 1% from its record all-time high of 7696. Last month was the best August performance in 4 years for US markets, and as we now come to the end of the summer traders will be keenly watching to see if the latest breakouts higher can gain traction.
The bearish engulfing candle seen last Thursday on the US500 remains a potentially ominous sign going forward and it’s not unless price breaches 2917. Looking back through 2018 we can see that on a couple of occasions bearish engulfing formations have heralded significant pullbacks on 2 occasions (marked 1. And 2. On the chart below). However, it is worth also keeping in mind that on at least one occasions this signal has proven to be a false dawn with the setup from July (marked 3.) being negated the very next day with a bullish engulfing candle.
Thursday saw a bearish engulfing candle printed on the US500. Note that one 2 previous occasions in 2018 this has occurred before a sizable pullback but also that the prior occurrence proved a false dawn in mid-July. Source: xStation
Volumes are expected to be a little lighter this afternoon with the US having a bank holiday for labour day. This is only 1 of 9 days throughout the year that the New York Stock Exchange (NYSE) is closed.
Looking beyond the large-cap indices the small-cap US200 has been looking quite strong lately, notching record highs just last week and not experiencing the same pullback seen elsewhere on Thursday. The 1720 level remains important to keep an eye on for this market as this is where price broke out higher from a couple weeks back. The last time the market made a significant break higher was in the middle of May this year and that preceded a large move higher over the next month of approximately 7%. In the absence of any reversal signals and while price remains above 1720 the outlook remains unfavourable for shorts and while that remains the case the path of least resistance appears to be higher.
The US2000 has also made record highs of late, but unlike the US500 there has been little by the way of any reversal signs since. The breakout level at 1720 remains important and while price remains above there then it is still valid. Source: xStation
