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S&P 500 Short and AUDUSD Long: Top Trading Opportunities – By ASC


By the second quarter of 2022, there are several high -level themes vying for investor attention. The resilience of the general risk trend, the clear hawkish push from the world’s major central banks, rampant inflation and Russia’s attack on Ukraine all carry a serious burden on the global market bearings. There is potential in this mix to produce aid rallies – such as ending the war ahead of Eastern Europe – but how many scenarios show a vigorous bullish market that will offer a sustained climb in the S&P 500 to cross a sustainable drive toward record -high progressives? I freely acknowledge that the market may deviate from what I consider ‘rational’ for a long period of time, but I believe a break of this index below 4,100 would be a strong technical indicator. However, follow -up to validate the general bearish course of S1 requires a foundation.

S&P 500 chart with 20 Week SMA (Weekly)

Charts provided by John Kicklighter, created with the IG Platform

Basically, a break in the fog of war is a strong charge for relief rallies; but it seems that there are a few other things that can turn the switch to passion outright given the mix of obstacles we are facing right now. Forecasts of growth that naturally flattened after a pandemic, a stimulus -fed recovery has been further complicated by inflation and tighter policy expectations in the future. Even in polite trading circles, most are willing to admit that the Fed and other central banks are increasingly moving away from ‘unlimited QE’ or ‘central bank put’; in the general market position, the withdrawal of the safety net does not appear to be discounted at all. The recognition will be set not only when rates rise in the next few months, but also when the central bank begins to ‘tighten quantitatively’ vigorously. And, in case the market faints with the Fed and Co. maintaining their commitment to fighting inflation, complacency will turn to fear.

S&P 500 Chart Overlaid with Total Central Bank Stimulus (Monthly)

S&P 500 Short and AUDUSD Long: Top Trading Opportunities

Chart provided by John Kicklighter

I like to find market options with diametrical results on major events or themes. If speculative appetite really does increase in the next quarter, the list of explicitly risk-sensitive measures that actually look interesting both technically and fundamentally is relatively short. One pair I saw at the close of the first quarter was one that technically had a fairly tight forecast for its underlying yield difference. AUDUSD has historically been in favor of the Australian Dollar as the desire for risk exposure has grown. If the general speculative impetus persists or increases, preference for traditional carry trades will likely start to gain more traction than ‘common suspects’ such as the Yen cross that soared throughout March. The futures yield difference may be small on AUDUSD, but it has broad historical potential.

AUDUSD chart with 20 and 50 Week SMA (Weekly)

S&P 500 Short and AUDUSD Long: Top Trading Opportunities

Charts provided by John Kicklighter, created with the IG Platform

Technically, AUDUSD at the beginning of the quarter almost had room to reach the top of its latest range. There is a serious technical overhead around 0.8000 which defines the resistance of the trend line that extends back to January 2015 (with three major test points) and also occurs to coincide with the midpoint of the historical range 2011 to 2011. As ‘50 per cent Fib ’of the larger range , there is significant scope for bullish movement above that achievement. If we break above 0.8000, I would consider the release on the inverted head and shoulders pattern and further milestones for ascending progress. That said, I will be careful about my confirmation of that big picture transition.

AUDUSD Chart (Monthly)

S&P 500 Short and AUDUSD Long: Top Trading Opportunities

Charts provided by John Kicklighter with TradingView Charts

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