Stocks had a historic crash in March, and a historic bounce last week. Now the market is trying to hold a level that could determine where it goes over the next few weeks: 2467 on the S&P 500.
This was the peak on Thursday, March 19, shortly before the index crashed below the December 2018 low. Prices returned to test it on March 25 before continuing their recent bounce higher. Yesterday the index returned to 2467 near the closing bell and today the bulls have made a valiant effort to defend it.
But the tide of bad news is heavy. First President Trump suggested coronavirus deaths could approach 240,000. Then the situation worsened in the U.S. military and New York City. And today initial jobless claims spiked by a stunning 6.6 million – greater than the population of the entire Washington, DC, metropolitan area. Including the previous week’s 3.3 million, you’re looking at more people than all of metro Chicago.
A few things are tricky for the bulls. First, today’s bounce was partially spurred by the one-off event of Trump pushing for higher
USO
. Usually traders fade moves like that.
Second, more bad news is coming in the next two weeks as coronavirus keeps spreading. Non-farm payrolls will likely show more job losses tomorrow, and then comes earnings season. Investors already got a taste from
SHOP
, and it wasn’t good. (The e-commerce stock withdrew guidance after shelter-in-place orders hammered its small-business client base.)
Third, the February 24-March 23 decline was one of the most intense in history. The S&P 500’s false breakdown below 2347 might have been excessive in the short-term, but now the trend’s had enough time to recharge. Continuation lower may be a reasonable expectation considering the bearish momentum and negative fundamentals.
If the current level around 2467 fails, the next level to watch could be the recent low of 2192. After that is the 2084 zone, which was the S&P 500’s weekly close before the last Presidential Election in November 2016.
This was the peak on Thursday, March 19, shortly before the index crashed below the December 2018 low. Prices returned to test it on March 25 before continuing their recent bounce higher. Yesterday the index returned to 2467 near the closing bell and today the bulls have made a valiant effort to defend it.
But the tide of bad news is heavy. First President Trump suggested coronavirus deaths could approach 240,000. Then the situation worsened in the U.S. military and New York City. And today initial jobless claims spiked by a stunning 6.6 million – greater than the population of the entire Washington, DC, metropolitan area. Including the previous week’s 3.3 million, you’re looking at more people than all of metro Chicago.
A few things are tricky for the bulls. First, today’s bounce was partially spurred by the one-off event of Trump pushing for higher
USO
. Usually traders fade moves like that.
Second, more bad news is coming in the next two weeks as coronavirus keeps spreading. Non-farm payrolls will likely show more job losses tomorrow, and then comes earnings season. Investors already got a taste from
SHOP
, and it wasn’t good. (The e-commerce stock withdrew guidance after shelter-in-place orders hammered its small-business client base.) Third, the February 24-March 23 decline was one of the most intense in history. The S&P 500’s false breakdown below 2347 might have been excessive in the short-term, but now the trend’s had enough time to recharge. Continuation lower may be a reasonable expectation considering the bearish momentum and negative fundamentals.
If the current level around 2467 fails, the next level to watch could be the recent low of 2192. After that is the 2084 zone, which was the S&P 500’s weekly close before the last Presidential Election in November 2016.