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Make or break session for US stocks?


  • US indices slightly higher ahead of the opening bell
  • Monday saw large declines but price bounced from lows
  • Break of the 2764-2820 range key for US500


US stocks begun the new week with a bang yesterday, gapping higher on more trade optimism before being hit with some sizable selling and then recovering into the close. After price once more respected the region below 2824, sellers stepped in and saw the largest intra-day drop in several weeks with price tumbling over 50 handles from the highs. This decline came around the time of the European close, and also coincided with reports that  US congressional panel has issued 81 document requests in the Trump obstruction probe. This story has been on the backburner for quite some time now, but could start to be more market moving if it appears that the chances of an impeachment rise significantly.

US markets are edging higher ahead of their cash session, but the gains are small at the time of writing. Source: xStation


In general it’s been a pretty calm and tranquil couple of weeks for stocks as they’ve consolidated around their highs after the rip-roaring start to the year. This has coincided with a steady drift lower in the volatility index (VOLX on xStation) which has fallen from above 30 to the low 14s yesterday. One warning sign that we were in for a more volatile session was a pretty large spike in the VOLX with a jump of 2 handles or 14% in less than 4 hours. This jump has since faded somewhat but it could be worth keeping an eye on this market going forward as a push up above 16.35 could signal some downside in stocks.

The VOLX spiked yesterday and should the market rally again then it could signal some downside for US stocks. Source: xStation

The US500 could now be at a possible inflection point, with lows around 2764 potentially key support. A break below there would target further declines to 2732 and even 2676 while on the other hand a break above 2820 would pave the way for further gains. The 8 and 21 EMAs have printed a bearish cross lately, and while this hasn’t worked too well on recent occasions, it could still be seen to signal that the intermediate trend may be turning lower. The recent price action has offered the shorts an opportunity to regain control of the tape, but if they fail to press home this advantage then more gains can be expected ahead.  

US500 could be at a pivotal level after Monday’s declines and if the market can take out recent lows around 2764 then a further pullback is possible. Source: xStation 


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