U.S. equity markets reversed course as profit taking takes form as year-end approaches. US stocks pared gains as lack of an economic catalyst and a strong dollar started to weigh on market valuations.
The US currency traded at its strongest level in more than a decade and oil remained near a 17-month high.
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