Source: PaxForex Premium Analytics Portal, Fundamental Insight
US Final Building Permits for November are predicted to increase by 1.1% monthly to 1.487M permits. Forex traders can compare this to US Final Building Permits for October, which dropped by 4.75% monthly to 1.471M permits.
US New Home Sales for October are predicted at 721K new homes. Forex traders can compare this to US New Home Sales for September, reported at 759K new homes.
The lack of economic data on Cyber Monday will have traders focus on strong retail shopping numbers out of the US during Thanksgiving and Black Friday weekend. They will also weigh the record headline numbers from Black Friday, where sales topped $9.8 billion, against the massive discounts retailers gave, the impact on earnings, and the potential for a dull holiday shopping season after today, where online sales are predicted to hit an all-time high. Many retailers gave cautious outlooks and news about record sales masks the fundamentals behind it.
Many traders believe the Santa Clause rally arrived early and could last, with major equity indices up 10% plus after hitting multi-month lows four weeks ago. Retail bullishness rose for a third consecutive week and is almost 10% above historical averages, suggesting most retail traders have already deployed their capital and turned to hope they guessed the timing of their investments.
Structural weakness increased behind the scenes, with inflation likely to remain sticky above 3% and growth slowing. Some may cheer the potential of an avoided recession but ignore the potential for stagflation to erase economic output and prosperity for the rest of this decade. Debt levels cannot sustain equity market rallies, and the SP500 is ripe for another correction.
The forecast for the SP500 turned cautiously bearish after this equity index rallied into a massive horizontal resistance area. Confirming the decline in upside pressure is the flat Kijun-sen, and the gap to its ascending Tenkan-sen suggests that volatility could increase. The Ichimoku Kinko Hyo Cloud shows a bullish crossover, but the flattish Senkou Span B hints at weakness, and a reversal may follow. Traders should also monitor the CCI following its breakdown from extreme overbought territory. A negative divergence preceded the breakdown, and a move below zero could trigger a more substantial sell-off. Can bears overpower bulls and regain control over the SP500 to force price action into its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the SP500 Index remain inside the or breakdown below the 4,520 to 4,570 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 4.545
- Take Profit Zone: 4.320 – 4.365
- Stop Loss Level: 4.610
Should price action for the SP500 Index breakout above 4,570, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 4.610
- Take Profit Zone: 4.700 – 4.745
- Stop Loss Level: 4.570
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