The US market is continuing its rally despite the harsh economic situation on the ground. Will this disconnect remain throughout June and summer?
This article reviews economic and political trends. But above all, we analyse which companies are fueling the stock price growth the most.
When analysing the financial markets with fundamental analysis, it would seem to suggest a different story. In particular, we heard about a new chapter in the US-China trade war.
We also saw about 40 million people that lost their jobs due to Covid-19. And lastly, there is a general eroding of confidence in central bank-generated money (as demonstrated by the remarkable increase in the physical gold demand).
Nevertheless, if we look at the S&P 500 chart reported below, it is evident that the market is basically insensitive to this situation. It is surely affected by the enormous amount of money injected into it.
The S&P 500 index is said to indicate the market status. However, if we closely analyze the 500 companies considered we can observe that, year to date, the 5 biggest companies are up 15%. While the remaining 495 are lower by a collective 8%.
Therefore, the whole US market is represented by 5 biggest companies only that are the so-called FAAMG:
From a technical standpoint the SPX setup is bullish. After a small congestion, the price recently crossed upwards the 200 moving average (blue line).
In the short term, we could expect a continuation of this trend with a first resistance at about 3100. A more important resistance level is located in the 3240-3250 area (pink rectangle in the chart) that could be reached by the end of the month. We could then see a retracement before achieving new all time highs.
In summary, we could maintain a long bias but with some downside protection through PUT or PUT spread options.
Thinking about options but not sure yet? There are a couple of ways to move forward before committing to the course or educational signal service. Here is how you can stay in touch:
If you are ready to move forward, then you can choose from:
Marco Doni – ecs.OPTIONS expert and CNBC contributor
The articles are not intended to give any advice on how to invest money, they are just for educational purposes.