S&P 500 (SPY) Tests Support At 3635 As Dollar Moves Back To Yearly Highs
- S&P 500 remains under pressure as Treasury yields test new highs.
- Energy stocks managed to gain some upside momentum today as WTI oil rebounded from recent lows.
- A move below 3635 will push S&P 500 towards the support at 3600.
S&P 500 Tests Yearly Lows
S&P 500 lost momentum and moved to new lows as traders continued to move out of riskier assets.
The yield of 10-year Treasuries tested new highs near 3.98%. The U.S. dollar also gained upside momentum and moved closer to yesterday’s highs. Strong dollar is bearish for stocks as it hurts profits of international companies and makes stocks less attractive for foreign investors.
Real estate stocks are also moving lower, which is not surprising as Treasury yields are testing new highs. REITs typically have significant debt levels, so they are sensitive to changes in yields.
From a big picture point of view, the market remains nervous. Today, S&P 500 made an attempt to gain upside momentum but faced strong resistance, which shows that traders are ready to use upside moves as an opportunity to sell stocks.
At this point, it looks that the market will continue to move lower if the U.S. dollar keeps testing new highs. The dynamics of the U.S. dollar will likely serve as the key catalyst in the near term. Stocks will have a chance to rebound when the American currency pulls back from highs,
S&P 500 Is Oversold, But Buyers Cannot Provide Enough Support To Stocks
The technical picture for S&P 500 remains bearish. While RSI is in the oversold territory, S&P 500 managed to settle below the support level at 3660 and is testing the next support at 3635.
This is an important support level as S&P 500 failed to settle below 3635 back in June. If S&P 500 declines below this level, it may quickly move towards the next support level at 3600.
For a look at all of today’s economic events, check out our economic calendar.