Since the Q4 of last year until today, we haven’t seen a reasonable retracement in global equities, especially in the US equities.
For the past few weeks, S&P 500 and DowJones had a slight retracement to the downside, which did not exceed 3%.
This was right before the French election, which was considered as the riskiest event of last week. However, when Macron made it to the second round, the market fear has eased significantly, as he is projected to win the second round of the election by more than 60% according to the latest polls.
As a result, global equities spiked once again, ending the recent downside retracement, and now they are close to record highs ahead of the second round of the French election.
The question remains here, when and how the US and the global equities might get a notable correction?
S&P500 Failed Near Record High
(Click on image to enlarge)
The S&P500 retraced for almost a month or so, since it spiked to a new record high in February, declining from 2399 record high all the way back to 2322 in Mid-March.
Since then, it has been trading within a tight range, until it bottomed out on April 13th around 2328.
On Monday, the S&P500 opened higher due to the French Election results, leading to multiple days of gains until yesterday.
The Index managed to rise to as high as 2398 at the beginning of the session, few points away from a new record high. However, it failed to do so, and eased back, closing the day at 2387, forming a bearish shooting star on the daily chart, which could be a double top formation as well.
The technical indicators are also overbought, which might be a sign that yesterday’s failure could be another sign of another retracement ahead.
In the meantime, the possibility of another leg lower is highly possible, especially if the ECB also disappointed the markets today.
If so, the downside targets would be at 2380, 2365 and 2356. The invalidation level for such decline would be a spike above the record high.
