2016-10-13 12:32:50

Review and dynamics
The index S&P500 has dropped by 2.1$ in the past three days on expectations of the interest rate hike in the United States.

The minutes of the last FOMC meeting released yesterday, did not clarify this matter, which has been constantly discussed since last December when the Fed raised the rate by 0.25% first time in many years. The minutes showed that FOMC members have different opinion on the timing and the pace of the rate hike in USA. However, majority of the Fed leaders believes that it would be appropriate to raise rate before the end of this year.

Now, market participants expect the rate will be raised by 0.25% in December, which causes the rise in the USD and the decline in the stock market.

At the opening of today's European session, the index S&P500 fell by 1% and approached support level of 2119.0 (ЕМА200 on the daily chart).

Our opinion
On the daily chart a new downward channel has been formed with the lower limit between the levels of 2050.0 (Fibonacci 38.2% after the rise since February 2016 at the level of 1828.0) and 2102.0 (ЕМА200 on the daily chart and Fibonacci 23.6%).

It is likely that the price will not maintain the level 2119.0. In case of breakdown of the support level of 2102.0, new targets will be at the levels 2075.0 (lower limit of the descending channel on the daily chart) and 2050.0 (Fibonacci 38.2% and ЕМА144 on the weekly chart). Further decline is unlikely.

The head of the US Fed Janet Yellen said earlier that the interest rate increase would indicate stability of the US economy. However, such measure as the interest rate increase is not sufficient enough to change the bullish trend of the U.S. stock market.

The traders can expect the rebound when the index comes closer to support level of 2102.0.

On 4-hour, daily and weekly charts the indicators OsMA and Stochastic give sell signals and show that the price can break down support level 2119.0 and reach the level of 2102.0.

Crucial level for the bullish trend is support level of 2050.0.

The bullish trend can change after breakdown of support level of 2007.0 (Fibonacci 50.0%).

Meanwhile, the index is above the levels 2119.0 and 2102.0 and positive medium-term trend continues.

The nearest resistance level is 2154.0 (lows of August, ЕМА200 on 4-hour chart, ЕМА50 and the upper line of the descending channel on the daily chart).

Support levels: 2119.0, 2102.0, 2093.0, 2075.0, 2050.0, 2030.0 and 2007.0.
Resistance levels: 2154.0, 2171.0 and 2192.0.

Trading tips
Sell Stop: 2118.0. Stop-Loss: 2125.0. Targets: 2102.0, 2093.0, 2075.0, 2050.0, 2030.0 and 2007.0.
Buy Stop: 2132.0. Stop-Loss: 2122.0. Targets: 2154.0, 2171.0 and 2192.0.

At the strong support level of 2119.0
At the strong support level of 2119.0

The nearest resistance level is 2154.0
The nearest resistance level is 2154.0