Another week of trading comes to a close and for some, this weekend will be a time to celebrate a week of great trading. For other however, it will be a time to reflect on losses, while for the unlucky few it will be a time to ruminate on missed opportunities. Having my usual end of week chat with traders it seems the big move that is capturing attention ahead of Friday drinks later is the rebound in the S&P. What can’t go down must go up it seems, following a sell off at the start of the week, the index rebounded almost 4%, over 600 points! So, if you caught the move, bravo! If you missed it? Well, there’s always next week. Now, let’s take a look at what caused the move and why this was a great trade.

What Caused the Move?

The week started with a positioning dump in the S&P as fears over the growing Delta-variant wave took hold. The new variant, has bene tearing through the West with Europe and the UK experiencing soaring levels of new infections. Over the weekend, reports of fears that fresh lockdowns might be needed to curtail the spread of the virus weighed heavily on investors minds, leading to many a sell button being hit at the open on Monday.

Upbeat US Data Weighs

Now, bear in mind that the under pressure into Friday’s close on the back of a bumper set of US Retail Sales for June. The upbeat data once again turned focus back to Fed tightening expectations, leading USD higher and equities lower.

Weak Hands Shaken Out

So, this was the scene at the start of the week. However, as we have seen countless times throughout the year, the sell off proved merely to be a correction in the index. Weak hands were shaken out on the drop, with late joining speculative traders unloading or getting stopped out. However, longer term traders held focus and simply used the correction as a buying opportunity.

Market Shakes Off COVID Fears

Ultimately, the Delta variant spread is a cause for concern but with vaccination rates rising rapidly deaths are staying low and hospitalisation are well off the level seen during the last wave, suggesting that the situation will not intensify as it has previously. For now, this seems good enough for investors who have ploughed back into the S&P taking it back up to highs.

Technical Views

S&P500

The correction ins the S&P saw price trading back down through the 4295.75 level. However, price traded as far as a test of the 4236.50 level, mapping the length of the prior correction, before buyers stepped in and drove price higher. While price has yet to break highs, both RSI and MACD have turned higher here suggesting room for a breakout to fresh highs in the near term.