S&P 500- THE CORRELATION WITH COVID AND NEXT TARGETS
Hello,
SPX touched the retracement area (red rectangle at the 62-31 fibo levels from the ath at 3400 to 2200) after few days of euphoric uptrend that was due to FED and Trump declaration of monetary stimulus to the economy, but as we know, the effect of that kind of news just last for a limited amount of time. Then reality comes in.
The blue line is the number of confirmed covid sick people in US, from 1k cases in mid March to 188k at the end of the month. Funnily enough, that rebound of SPX coincided with the exponential and most serious spread of the desease.
At this point a question come to my mind: did the SPX already discounted the lockdown period before the explosion in its own country (as the index started to fall well before US experienced the explosion of the illness, in concomintance with European fall), or the index simply did not realize yet the potential effects of a prolonged lockdown?
I think the second one, for two reasons:
1- The covid curve is not even a curve, it resembles more to a vertical line. No sign of reduced inclination in sight yet, meaning that we do not know where it can start decreasing the slope, nobody knows, so the market can not "discount" anything. This leads to the second reason.
2- In my experience market participants are good when they can compare things with the past, less good on average when a completely new scenario plays out. I think we have still more way down in front of US.
The more they wait for a total lockdown, the more it will last.
Next targets can be
2200 - retest of the min (-11% from here)
1825 would be next step (-26%)
1555 is for the moment very far (-37%) but the fibo extension of the downtrend also confirms that possibility
Also, even if companies would reopen tomorrow, time will be needed for people to get back their confidence and willingness to spend. 2200 can be considered a "very good" level as positive scenario. Said that, it is a good moment to start buy for the Long Term in a pyramidal purchase plan dividing your capital in 3-4 steps.
I just wanted to show you the covid interesting lag compared to spx, I will come back with ideas and with analysis on other markets and asset classes to see where they are and where they can go.
Cheers
SPX touched the retracement area (red rectangle at the 62-31 fibo levels from the ath at 3400 to 2200) after few days of euphoric uptrend that was due to FED and Trump declaration of monetary stimulus to the economy, but as we know, the effect of that kind of news just last for a limited amount of time. Then reality comes in.
The blue line is the number of confirmed covid sick people in US, from 1k cases in mid March to 188k at the end of the month. Funnily enough, that rebound of SPX coincided with the exponential and most serious spread of the desease.
At this point a question come to my mind: did the SPX already discounted the lockdown period before the explosion in its own country (as the index started to fall well before US experienced the explosion of the illness, in concomintance with European fall), or the index simply did not realize yet the potential effects of a prolonged lockdown?
I think the second one, for two reasons:
1- The covid curve is not even a curve, it resembles more to a vertical line. No sign of reduced inclination in sight yet, meaning that we do not know where it can start decreasing the slope, nobody knows, so the market can not "discount" anything. This leads to the second reason.
2- In my experience market participants are good when they can compare things with the past, less good on average when a completely new scenario plays out. I think we have still more way down in front of US.
The more they wait for a total lockdown, the more it will last.
Next targets can be
2200 - retest of the min (-11% from here)
1825 would be next step (-26%)
1555 is for the moment very far (-37%) but the fibo extension of the downtrend also confirms that possibility
Also, even if companies would reopen tomorrow, time will be needed for people to get back their confidence and willingness to spend. 2200 can be considered a "very good" level as positive scenario. Said that, it is a good moment to start buy for the Long Term in a pyramidal purchase plan dividing your capital in 3-4 steps.
I just wanted to show you the covid interesting lag compared to spx, I will come back with ideas and with analysis on other markets and asset classes to see where they are and where they can go.
Cheers
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