S&P 500 Index Technical Price Outlook: SPX500 Near-term Trade Levels
- S&P 500 Index updated technical trade levels & sentiment – Weekly & 120min Charts
- Coronavirus sell-off drives SPX500 into downtrend support- bears vulnerable near-term
- What is S&P 500? A Guide to the S&P 500 Index
The S&P 500 Index has collapsed more than 30% off the February record highs amid the ongoing Coronavirus global pandemic with the sell-off nearly reversing the entire Trump inauguration rally. The decline is now approaching levels of interest for downtrend support and may offer a near-term reprieve in price. These are the updated targets and invalidation levels that matter on the SPX500 technical price chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this SPX500 trade setup and more.
S&P 500 Price Chart – SPX500 Weekly
Chart Prepared by Michael Boutros, Technical Strategist; S&P 500 Index on Tradingview
Technical Outlook: In my last S&P 500 Price Outlook we noted that we were on the lookout for possible downside exhaustion as the index was approaching uptrend support. A rebound of more than 12% into the close of the week did not last with the index plummeting to fresh three-year lows. A descending pitchfork formation extending off the 2018 / 2020 highs may be in play here but its too early to tell. For now, watch the daily close with respect to the 61.8% parallel, currently around ~2370s.
Downside weekly support objectives eyed at the 2017 yearly open at 2239 and the lower parallel / 2194- look for a larger reaction there IF reached. Weekly resistance now stands back at the 2018 low-week close at 2486- a close above this threshold would be needed to alleviate further downside pressure near-term.
S&P 500 Price Chart – SPX500 120min
Notes: A closer look at S&P 500 price action shows the index trading within the confines of a near-term descending channel formation extending off the monthly highs. Note that he recent decline is marking momentum divergence into the lows with the immediate short-bias vulnerable heading into channel support / the 1.618% extension at 2250.
Initial resistance stands with the 2018 weekly close-low at 2412 backed by 2497-2521- look for a reaction there IF reached with a breach / close above needed to suggest a larger recovery is underway towards 2600. A break lower from here exposes subsequent support objectives at 2194, the 2016 August low at 2147 and 2114- both levels of interest for possible downside exhaustion IF reached.
Bottom line: The S&P 500 collapse is approaching levels of interest for possible support / exhaustion just lower. From at trading standpoint, look to reduce short-exposure / lower protective stops on test of channel support with a breach / close above 2521 needed to suggest a more significant low is in place near-term. Keep in mind that Coronavirus headlines will contlines to drive sentiment here- stay nimble until we get further clarity in price.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
S&P 500 Trader Sentiment – SPX500 Price Chart
- A summary of IG Client Sentiment shows traders are net-long the index - the ratio stands at +1.34 (57.34% of traders are long) – weak bearishreading
- Long positions are12.13% higher than yesterday and 0.21% lower from last week
- Short positions are 14.30% lower than yesterday and 11.76% lower from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests the S&P 500 may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes suggests us a stronger S&P 500-bearish contrarian trading bias from a sentiment standpoint.
| Change in | Longs | Shorts | OI |
| Daily | 3% | -1% | 0% |
| Weekly | -3% | -4% | -4% |
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- Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex
