#sp500 #spx #sp1! – The S&P 500 tagged the 61.8% Fibonacci level(December 2018-February 2020) on yesterday’s record market drop which was the expected target level in my previous chart and has now bounced back above the 50% fib level in the overnight futures session. The bounce comes after President Trump announced a proposed payroll tax cut yesterday, as well as potential relief for hourly-wage workers to ensure that they don’t have to worry about loss of income over potential time missed from work due to illness. While this appears to be giving the markets cause to buy the dip in the short-term, it will have little affect on the overall market or economic activity should we see widespread sickness in the US or city-wide quarantines since sick people stuck at home aren’t going to be out shopping, visiting restaurants or other service-based establishments. Businesses will still suffer financially if they see a drop in foot traffic due to the coronavirus. Trump is due to give more info on the payroll tax cut today so we’ll see how spot markets react once he provides an update and more details on his proposed plans.
I’ve drawn another Fib retracement within the larger Fib levels, the smaller Fib retracement representing the retracement levels within the recent market drop which has taken place over the past four weeks. The level that we need to see price beat in order to consider a return to bullish trend is the 50% fib highlighted in the yellow box and then confirmation with a move above the 61.8% Fib just above the upper wedge line. Worth noting is that this 50% Fib level is just below the upper line of the broadening wedge pattern which will be the likely area of resistance should price continue higher this week.
For now, we can likely expect a reactionary bounce after the extreme oversold conditions seen during the four-week selloff, especially after yesterdays record move down into bearish correction territory which triggered circuit breaks at market open. This could easily reverse if the market deems Trumps payroll tax cut as too small to be effective, or if the coronavirus spread across the globe and in the US sees a significant rise in transmission and deaths.
Volatility is the name of the game for now as traders’ emotions dictate their buying and selling habits, short-term view is now neutral based on the 61.8% Fib level support and bounce.
I’ve drawn another Fib retracement within the larger Fib levels, the smaller Fib retracement representing the retracement levels within the recent market drop which has taken place over the past four weeks. The level that we need to see price beat in order to consider a return to bullish trend is the 50% fib highlighted in the yellow box and then confirmation with a move above the 61.8% Fib just above the upper wedge line. Worth noting is that this 50% Fib level is just below the upper line of the broadening wedge pattern which will be the likely area of resistance should price continue higher this week.
For now, we can likely expect a reactionary bounce after the extreme oversold conditions seen during the four-week selloff, especially after yesterdays record move down into bearish correction territory which triggered circuit breaks at market open. This could easily reverse if the market deems Trumps payroll tax cut as too small to be effective, or if the coronavirus spread across the globe and in the US sees a significant rise in transmission and deaths.
Volatility is the name of the game for now as traders’ emotions dictate their buying and selling habits, short-term view is now neutral based on the 61.8% Fib level support and bounce.