Just when you thought equities might turn things around to start the new year, we're now dealing with a bit of a not so fast moment. As highlighted here, the failed breakout for the S&P 500 is the key thing to watch and we saw the index fall another 0.7% in trading yesterday.
The 200-day moving average (blue line) and key trendline resistance (white line) from the downtrend last year remain the major levels limiting any material upside momentum in US equities at the moment. It does play a factor into overall risk mood as well but note how I am trying to slowly start distinguishing between US stocks and European stocks.
The former is still a key driver of the risk mood in broader markets. However, during periods where risk tones are less impactful, one can potentially expect there to be a distinction between the performance of US and European equities. That is considering the recent market optimism about the situation in Europe.
While US equities are struggling to break the key resistance levels above, the latest setback this week is but a dent to the stellar run in European equities so far this year.
The Eurostoxx, DAX, and CAC 40 indices were trading at its highest levels since February last year before the retreat this week, with the UK FTSE having closed in on its all-time high set in 2018.
Equity futures are looking calmer today but this is perhaps a consolation after the drop in the past two days and for US stocks in particular, it isn't much of a comforting state. Looking at the S&P 500 chart above, there is scope for sellers to try for a push of the 100-day moving average at 3,865 with topside resistance levels still firmly defined as highlighted above.
