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MENAFN- Daily Forex)
The S&P 500 has been rather negative during the month of July, especially as we get closer to the end of it. With this being the case, I think you get a situation where we might see a little bit of a correction in August, but there are a lot of variables that we will have to keep in the back of her mind.
The first one of course will be the fact that at the very beginning of the month, we will have a significant central bank deluge of information, and of course that includes the Federal Reserve. A lot of traders are out there hoping that the Federal Reserve will cut rates, but the reality is that if and when they start cutting rates, that might be a situation where they are cutting rates for a negative reason. Because of this, we could have a situation where the market actually falls during its interest rate cuts.
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Despite the fact that a lot of traders believe that interest rate cuts will spur the stock market , the reality is that when we are heading into either a recession or some type of economic downturn, quite often interest rates are thought of as a negative sign because the Federal Reserve is now trying to play“catch up” to the economic realities. After all, these are the same clowns that recently suggested that inflation was“only transitory” and would be disappearing soon Analysis
The technical analysis for this pair is still very strong, and I don't necessarily think that we are looking at some type of meltdown. In fact, you could see a month that features two separate stories, the original pullback, before turning around and showing signs of life again. It's hard to tell at this point in time, but I think that we should see a certain amount of support near the 5250 level, and then after that the 5050 level.
To the upside, the 5600 level seems to be significant resistance, but if we were to break above there then I think it opens up the possibility of a move to the 5700 level. Anything above there could kick off a much bigger move, but right now I think we are just a little bit overextended, so I expect the beginning of the month to perhaps be a bit spongy.
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