Wed, October 6, 2021 | 7:59PM ET

Biggest S&P Reversal since February- What’s Next?

Name: FS Insight
Price range: $$$

FS Insight Team

Key Takeaways

S&P erased a 1.3% loss on Wednesday, representing the biggest reversal since February
Commodity breakout of its four-month consolidation is bullish, despite a rising USD
Bitcoin breakout of its Sept highs is a positive on a 4-6 week basis, though gains will need to be consolidated near-term

SPX early weakness failed to break this week’s lows and reversed to close at the highest daily close of the last seven trading days. Unfortunately, this still hasn’t broken the multi-day trading range, and currently prices remain in short-term consolidation as part of an existing downtrend. Upside lies at 4375 while downside support lies at Monday 10/4 lows at 4278. Until this downtrend from September is broken, it’s still likely that prices might briefly undercut this week’s lows, though should represent a buying opportunity near July lows, with initial support zone found at 4216-4244.

Biggest S&P Reversal since February- What’s Next? — Source: Trading View

SPX Hourly Chart Puts Wednesday’s Bounce into Perspective

While a 1+% reversal certainly seems impressive, unfortunately it didn’t help SPX structure too much just yet. Climbing above 4375 is needed to have a more positive view on this bounce extending, and it will be right to actually surpass the existing downtrend line. Until this happens, this bounce could still fail and move to temporary new lows given this structure.

Commodities Have Shaped Up Quite A Bit in Recent Weeks, Despite the US Dollar Rally.

Cotton, Natural gas, WTI Crude, have all pushed higher to multi-month highs in recent weeks, while Coffee and Sugar are coiling, readying for their own potential breakouts in days to come

DBC, the Invesco DB commodities tracking fund, has jumped about 5% since mid-September. This broke out above a four-month consolidation range that had held since May of this year.

Gold and Silver still look to be laggards and look early to overweight, though these are thought to be buyable on weakness into late October. Natural Gas has gotten extended, and could peak out by late October. Meanwhile, Coffee and Sugar look actionable for possible upcoming breakouts.

Bitcoin Breakout Constructive

BTCUSD looks to be outperforming within the Crypto space in breaking out above September highs with Wednesday’s trading helping BTCUSD to eclipse 55,000. This is a bullish development technically speaking and should lead back to test Spring highs near 65,000 into November. Near-term this spike has made hourly RSI stretched, and DeMark indicators are starting to spring up on intra-day timeframes. Thus, this might require some near-term consolidation. However, structurally, this remains a bullish move, and it’s right to be bullish technically, and buy dips.

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