Summary:

• US stocks began the week in a bullish mood with large gains
• The US500 is now firmly back above 2700 but remains in consolidation
• Fib levels to keep an eye on

Despite the recent rhetoric surrounding trade wars from the US and the outcome of the Italian election, stock markets have begun the week in a bullish mood. Monday’s session saw strong moves higher across all the major indices and this morning has witnessed more gains.  

 Indices are all in the green across the Atlantic with the US2000 leading the gains in North America. Source: xStation 

The US500 is now trading back above the 2700 level and has recouped a fair portion of the losses seen at the tail end of last week. The bigger picture reveals that price appears to be consolidating with higher lows and lower highs seen in the past week or so after the large drops we got at the start of February.  

 The US500 remains in a triangular consolidation. A break of this could lead to the next sustained move. Source: xStation

Given that a strong rally preceded this consolidation it could be seen to be the forming of a bull flag which would suggest that further upside may lie ahead if price breaks to the upside. Alternatively a break below the rising trendline would constitute a failure of this setup and potentially signal the rally is over. 

Another way of viewing the market is to see it along the lines of a fib retracement of the drop from the beginning of February. The 61.8% has previously providing resistance and if the market can get back up to 2747 then it will be interesting to see how it reacts. 

 The 38.2% fib at 2664 and the 61.8% at 2747 could be levels to keep an eye on going forward. Source: xStation

Last week’s lows came around the 38.2% fib at 2664 and this could now be seen to be important as far as possible support goes.