Stock indexes need to consolidate August gains after a strong July

  • NAS100
    (${instrument.percentChange}%)
  • SPX500
    (${instrument.percentChange}%)
  • US30
    (${instrument.percentChange}%)

The above shows the US30, SPX500 and NAS100 monthly charts. July charted long blue candles for each index, with the US30 and SPX500 closing between the blue bands in their respective neutral areas. Whilst the NAS100 lagged, it has pushed upwards into neutral during the first twelve days of August.

The indexes need to consolidate these positions. This stabilisation will provide a platform to potentially move back into bullish zones between the upper blue and red bands. If this happens and the stochastics push above 80 and hold (blue arrows), an underlying bullish momentum will be present.

However, if they end August back in their bearish areas, between the lower blue and red bands, July into August will be regarded as a bear market rally. To this end, we are keeping an eye on the real interest rate:


Source: www.tradingview.com

Real interest rates declined in July (blue arrow). This drop coincides with the stock index's positive July run. Intuitively this makes sense as the lower rates support a higher discount factor. However, the real rate's position is between the upper blue and red bands in its bullish zone. If this maintains, it may mean higher rates ahead, which will be a headwind for the stock indexes.

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

Disclosure

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}