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Tuesday’s US trading session was marked by a sell-off in all sectors of equities. It started as a profit taking at new highs and turned into a correction which offset last week’s gains..
S&P 500
Why are we talking about profit taking? The S&P 500 index has risen exactly twice from the lows of last spring’s coronavirus. It only took it 354 trading days to do so. Such a fast rebound has not been seen since World War 2. According to statistics, it takes an average of about 1000 trading days to rise 2-fold after a price collapse.
Are there more reasons for a correction? There are many, analysts can tell us about the slowing Chinese economy, geopolitical instability (the Taliban taking power in Afghanistan), an increase in the number of people falling ill with the delta strain of coronavirus. And, of course, investors are spooked by talk of the US Federal Reserve scaling back its bond-buying programme.
From a technical point of view everything looks very nice. Note the last three retracements of the S&P 500 Index to the 50-day moving average (shown in red on the chart). Visually the exact same time frame has passed, which means it is time for a correction.
Today will be the important day. One, even a long red candlestick does not indicate anything. However, if today also ends in a decline, it is very likely to be worth waiting for the price at the SMA 50 level again.
04.00 Reserve Bank of New Zealand interest rate decision
08.00 UK Consumer Price Index for July
11.00 EU Consumer Price Index for July
20.00 US Federal Open Market Committee Meeting Minutes
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