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S&P 500 has continued flowing higher today, extending the strong rebound initiated last Friday after posting a fresh two year low at 1807.00. The Current rally has been bolstered by the recent rallies in Oil and the oversold condition of global stock markets.
An Improving sentiment was boosted by data released on Friday, that showed that U.S. consumer spending recaptured momentum in January, indicating that the economy may not be as sluggish as investors had feared in recent weeks.
Today the S&P500 opened higher as the decision of freezing output levels taken by the Oil ministers of the world’s four largest Oil producing countries after a confidential meeting in Doha, have lent support to the market. This decision is expected to support efforts to balance the current global Oil supply glut.
Focus will soon begin shifting to the upcoming earnings season, when company earnings will be scanned for financial performance as wel as indirect evidence on the strength of the economy as well as the pricing power of companies in the current market. Better pricing power and improving gross margins can be an indicator that can hint at the possibility of rising interest rates down the line, as the economy gains momentum.
Fig: SPX500 Weekly Technical Chart
On the weekly chart, SPX500 started rebounding after hitting the bottom of slightly descending flat channel. Price is attempting to rebound higher for the second time as previously it rebounded to 1945.7 after forming a 14 month low at 1810.4 on 17th January but encountered a second selloff from there to a new two year low at 1807.00 near the previous low. So prices in SPX500 have formed something similar to a double bottom on the weekly chart, which indicates strong demand in the market near the significant 1800.00 level. If current bullish momentum sustains it might retest the 1945.00 level, a breaching of which would open the door to go further high towards 1992.00. Conversely, if the price breaks down below the 1800.00 level it may initiate a free fall to the 1733.00 level.
Buy Digital Call Options on a break above 1901.00 and Digital Put Options on a test of 1938.00. Buy Digital Put Options on a break below 1798 and Digital Call Options on a test of 1755.00