US large caps’ short-term strength in longer term weakness

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

Longer-term charts

The below show the daily charts of FXCM's CFDs for the DJI (US30), SPX (SPX500), and the NDX (NAS100). The US30 is on the left, the SPX500 in the middle, and the NAS100 on the right. All three indexes are trading in their respective weak areas, between the lower blue and lower red bands. The prevailing reason is a general risk-off sentiment due to the tensions between Russia and Ukraine. Yesterday, Russian forces were ordered into two breakaway regions of eastern Ukraine, triggering fears of further military action. The rising escalations have contributed to uncertainty when yields are increasing, e.g., the US 10-Yr note is currently trading at 1.94%. The higher rates put pressure on present values, especially those of growth companies, now compounded by the prospect of military escalation and rising energy prices. The respective index stochastics have yet to drop into their lower quintiles; however, index values will likely be under pressure if they do drop below 20 and hold those positions.

Short-term charts

The below hourly charts show a different sentiment to the longer-term charts above. All three indexes are trading in their respective areas of strength, between the upper blue and red bands. Moreover, each index's Bollinger Bands show signs of expansion, i.e., short-term volatility is increasing. The NAS100's stochastic (on the right) has moved above 80, suggesting a robust short-term bullish momentum. The longer the stochastic can stay above 80, the greater the odds that prices will appreciate in today's session. The two other stochastics are heading toward their 80 areas too. Longer-term trends are more significant than their shorter-term counterparts. Therefore, the longer-term time frames need to move out of their weak spots between the blue bands in their respective neutral areas. Otherwise, the short-term bounce may be short-lived. We continue to monitor.

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.

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