#sp500 #spx #sp1! – S&P500 futures have once again gapped down as markets reopened for trading tonight, currently down -137 points for a -4.6% loss.
Price is now below the 50% Fibonacci retracement level which is the midpoint between the low seen in October 2018 and the high made in February 2020. 50% retracements after a large/long uptrend are generally viewed as healthy corrections within the overall price advance and represent good buying opportunities, while further declines below the 50% Fib indicate that the previous bull trend is at risk of turning into a bear trend, at least in the short-term. A sign that the bull trend is likely over and a new short-term bear market is forming would be a move below the 61.8% fib level which is the golden ratio retracement. Should price fail to regain the 50% level this week, the likely target will be the 61.8% fib shown in red at 2729 which would be another -3% decline from current price.
Also in the chart is a broadening wedge pattern, also know as a megaphone pattern due to its shape resembling a megaphone. A broadening wedge is a range where price is holding between two diverging trendlines, or lines that are moving apart. These lines are where traders can expect price to trade between, or find support and resistance at. A break above the upper wedge line is viewed as bullish and the beginning of a new uptrend, while a break below the lower wedge line is viewed as bearish and the beginning of a new downtrend.
In October of 2018 price broke above the upper wedge line and began the climb to new all-time highs peaking in February of 2020. While this move was viewed as bullish uptrend continuation, price has now fallen back within the wedge indicating that the previous break above it was a blowoff top rather than uptrend continuation. Now that price is back within the broadening wedge pattern, the potential for a test of the lower wedge line is now a possibility.
For now the level to watch this week, or possibly even on Monday, is the 61.8% Fibonacci retracement level highlighted in red. A move below this level is likely this week considering the coronavirus fear currently gripping markets and its impact on not just the US economy, but also the global economy. This weekend saw the situation deteriorate in regard to the virus and the climbing infection and death rates in the US, as well as new fears launched by Saudi Arabia as they attempt to put US shale out of business by increasing oil production which as of now as oil trading -22% lower than Fridays close.
It appears as though this week could be even more volatile than the previous two weeks, which both saw record price moves, moves not seen since the global financial crisis in 2008. We may be in for another emergency rate cut by the Federal Reserve ahead of their planned meeting which takes place March 17th-18th. Two emergency rate cuts within two weeks would be another new milestone and further evidence that the US economy is teetering on the edge of financial disaster ahead of what appears to be an inevitable slowdown in economic activity.
Price is now below the 50% Fibonacci retracement level which is the midpoint between the low seen in October 2018 and the high made in February 2020. 50% retracements after a large/long uptrend are generally viewed as healthy corrections within the overall price advance and represent good buying opportunities, while further declines below the 50% Fib indicate that the previous bull trend is at risk of turning into a bear trend, at least in the short-term. A sign that the bull trend is likely over and a new short-term bear market is forming would be a move below the 61.8% fib level which is the golden ratio retracement. Should price fail to regain the 50% level this week, the likely target will be the 61.8% fib shown in red at 2729 which would be another -3% decline from current price.
Also in the chart is a broadening wedge pattern, also know as a megaphone pattern due to its shape resembling a megaphone. A broadening wedge is a range where price is holding between two diverging trendlines, or lines that are moving apart. These lines are where traders can expect price to trade between, or find support and resistance at. A break above the upper wedge line is viewed as bullish and the beginning of a new uptrend, while a break below the lower wedge line is viewed as bearish and the beginning of a new downtrend.
In October of 2018 price broke above the upper wedge line and began the climb to new all-time highs peaking in February of 2020. While this move was viewed as bullish uptrend continuation, price has now fallen back within the wedge indicating that the previous break above it was a blowoff top rather than uptrend continuation. Now that price is back within the broadening wedge pattern, the potential for a test of the lower wedge line is now a possibility.
For now the level to watch this week, or possibly even on Monday, is the 61.8% Fibonacci retracement level highlighted in red. A move below this level is likely this week considering the coronavirus fear currently gripping markets and its impact on not just the US economy, but also the global economy. This weekend saw the situation deteriorate in regard to the virus and the climbing infection and death rates in the US, as well as new fears launched by Saudi Arabia as they attempt to put US shale out of business by increasing oil production which as of now as oil trading -22% lower than Fridays close.
It appears as though this week could be even more volatile than the previous two weeks, which both saw record price moves, moves not seen since the global financial crisis in 2008. We may be in for another emergency rate cut by the Federal Reserve ahead of their planned meeting which takes place March 17th-18th. Two emergency rate cuts within two weeks would be another new milestone and further evidence that the US economy is teetering on the edge of financial disaster ahead of what appears to be an inevitable slowdown in economic activity.