USA30, H1 and Daily
A significant improvement in sentiment, yesterday, has seen the USA30 making a key breakdown of Resistance against the overall sell-off seen in October. The bulls fought hard yesterday in order to put a positive session in but could they start dreaming of a possible recovery?
Despite a strong positive stock session yesterday, with global stock markets moving higher and bound to end the month on a more positive note, October was one of the worst months for global equities in more than 6 years. The market has bounced by nearly 513 points higher on the day, above the 23.6% Fib. retracement level from October peak and above the trend-line connecting year’s lows. Today, the index remains on a northwards path, by retesting a key area at $25,000 – $25,050.00, with the latter representing the 50% Fib. level of year’s rally.
However, this decisive turn higher, does not seem enough yet for the confidence to turn around on a consistent basis. This move needs to be followed by further gains today and hopefully another strong full-body positive candle. The early move is not a confirmation of a switch to bullish outlook but considering the huge selling pressure, this is certainly a start.
The big tests lie overhead though, with the Resistance at 25,500-25,530 area, which is between the mid-point of October’s decline and 20-day SMA barrier. The pair needs to sustain gains above 200-day SMA and to end the day or the week, by a move very close to or above this barrier (i.e. 25,500-25,530 area). On the failure of this positive scenario, the asset is likely to turn down the lows of 24,000 area.
In the intra-day chart, the market continues to respond positively however quite “doji-ly” this morning, with a small movement to the upside. This suggests that positive momentum is not strong enough to boost the index much higher. However in the near-term, after the break of 25,000 barrier which is at 200-period SMA in the H1 chart, could be followed by the retest of R1 at 25,112, and the 25,200 ( 38.2% Fib.level on October’s performance).
The daily momentum indicators are looking weak, and so far have no sustainable recovery signals, so it is too early to go claim bullish bias on the daily chart. RSI is sloping positive but remains well below 50, while MACD lines are increasing below signal line and neutral zone, showing that negative momentum holds.
However, on the hourly chart, there is more of a positive signal, with bullish divergences on hourly RSI and hourly MACD lines.
Support is in place now, at yesterday’s close at 24,929, with another higher but equally important Support to watch at 25,000.
Holding above these levels today, especially with a positive daily candle above 25200 would be a good sign for the bulls after a painful couple of weeks.
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Andria Pichidi
Market Analyst
HotForex
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