Summary:

• US markets trading lower ahead of Wall Street open
• 2562 a level to watch for the US500
• DE30 and UK100 both fall to their lowest levels of the month

Stock indices have begun the week in the red with the European morning seeing the DE30 and UK100 hit their lowest levels of the month – a technical overview of the DE30 can be found here. There is no major news to suggest that this sell-off is fundamentally led but given the large run higher we’ve had in recent months it could well be a case of some profit-taking. 

However, an initial pullback due to some profit taking can in fact turn into a deeper correction if key support is broken below and in this regard the 2562 could be an important level to watch for the US500 (US500.cash on xStation). We noted last Friday that recent drops in the market had been treated as buying opportunities on the last two occasions and whilst we did see some buyers step in the market has drifted lower and failed to continue its upwards trajectory.  

 The US500 has broken below a rising trendline and a drop below 2562 could lead to a deeper correction. Source: xStation

Friday’s trade saw an inside candle which could be seen as indicative of indecision and a break outside of Thursday’s range may be seen as a signal for the next sustained move. A rising trendline going back until the end of August has now been broken below and should price fall below 2562 then there may be a more sustained drop.  

 Fib retracements of the move higher could provide levels to watch on the downside should price fall lower. Source: xStation

Levels to look for on the downside should price break below 2562 can be found by using fib retracements of the latest impulse higher. the 38.2% and 61.8% level at 2529 and 2488 could be seen as possible supports whilst the all-time high seen last week at 2596 is an obvious place to watch for potential resistance.