U.S. equity markets climbed slightly higher as defensive posturing take form as year-end approaches. US stocks pared gains following both incidents in Turkey and Germany. In Germany a tractor trailer barreled into a crowded Berlin Christmas market, killing 12 and injuring 48 people. In Ankara, Russian Ambassador to Turkey was assassinated at an art exhibit by a lone Turkish gunman. The risk off move saw the yen rally 1.6% against the dollar.
Low volume is likely to persist as we near this weekend’s holiday, but a pullback could accelerate if we see US treasuries continue to edge higher.
The S&P 500 index futures daily chart shows the recent rebound has tentatively respected a bearish ABCD pattern. Point D is targeted with the 141.4% Fibonacci expansion level of the B to C leg. If we see a pullback towards the 38.2% Fibonacci level of the potential C to D move, we could see buyers come in and buy the dip. If the bearish drop persists, we could see a pullback target the $2,170 level. If the pattern is invalidated, further upside may target the $2,300 to $2,325 area.
The trade: Buy E-mini SP500 at $2,220, with a stop loss at $2,210 and a take profit at $2,250. The risk/reward ratio is 1:3