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US stocks looking to break higher

Summary:

  • US stocks set for green open 
  • US500 moves to highest level since mid-March
  • Looking to join US100 and US2000 in technical break higher

The market moves following last Friday’s NFP release were clearly impacted by Trump’s tweet ahead of time with the US dollar and Gold failing to show meaningful follow through after what was an all-round solid number. Stock indices however, did experience a solid move into Friday’s close with the US2000 and US100 leading the way. The US2000 is based on small cap US stocks and has been the strongest of all US indices in recent months, hitting another all-time high today. 

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The US2000 broke higher above 1613 last month after a near 4-month ascending triangle consolidation. Recently price has retested the breakout level and buyers stepped in with the market making a new all-time high today. A symmetrical target of the triangle would target a large move higher. Source: xStation

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 The US100.cash made a decisive break higher above 7000 on Friday and is now approaching its all-time high at 7194. As long as price remains above the Friday low of 6974 then the breakout remains valid and if the previous peak fails to cap gains then a larger push higher is possible. Source: xStation    

The timing of the break higher in both these markets could also be significant as they both conform to the Donchian weekend rule. The rule comes from legendary trader Richard Donchian who stated that it is significant when a market breaks out and closes to confirm the break on a Friday, with the reasoning being that it means it is held in "strong" hands. The rationale is basically that if longs are happy to hold a market after a break over the weekend they will be more willing to stick with their position compared to "weak" hands that would look to exit before the market closed. 

Looking at the US100 and US2000 traders may feel like they have missed the entry opportunity for the break higher, so naturally they may look at other US indices for similar setups. The US500 moved higher on Friday but failed to break above its recent resistance at 2741 but this morning it has with price reaching a 12-week high. Should the breakout be confirmed by a daily close above 2741 then there isn’t much in the way of overhead resistance in terms of swing levels until the 2800 region.    

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 The US500 could be set to make a breakout and follow the US100 and US2000 higher. A daily close above 2741 would further support a move higher after earlier the market hit a 12-week high. Source: xStation

 

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