John_Maynard_Keynes

Long term Prospect on SPX500 — How far is the Market gonna dip?

Long
OANDA:SPX500USD   S&P 500 Index
Conjuncture

As Coronavirus seem to have reached in the EU what looks to be so far its "propagation ceiling", the US is being rapidly contaminated with the virus; their extremely precarious healthcare system worsening the spread by making it increasingly harder for people to get tested. The US spread, being late of a week or two behind the EU, still has lots of room for propagation to grow. Therefore, as soon as the disease started significantly spreading in the US, the markets began accelerating to the downside despite already pricing within a really attractive range of prices.


This suggest that the market has just — or at least recently — started pricing the actual propagation in US territory, unlike what it was doing two weeks ago. This is a sentiment that is being reinforced by Chinese's global contamination number which has been decreasing for two or three days now. Nonetheless, keep in mind that these numbers (the Chinese ones), may only be partially reliable. If my postulate is correct, we should start seeing the Asian markets slowing down during the next week, the european markets (which are way closer from their weekly supports than the US) should follow the Asian pace shortly, while the US starts accelerating.

Context/Fundamentals

  • Coronavirus
  • Oil Crash and OPEC falls apart
  • EU ban
  • Weak economics fundamentals
  • Major Equities still overvalued
  • Central banks doubling down on complacent Monetary policy


Technicals

  • Weakening daily bearish RSI
  • Weekly support trendline broke to the downside (green)
  • Mid-Term support area 2571 to 2470 not holding prices anymore. Prices accelerating through the area in 4 hour and higher timeframes
  • Markets still have lots of room to the downside on weekly timeframes

Next Key Support Areas

Here's a weekly chart highlighting most of the attractive prices and levels of support, giving you a beforetaste of the amplitude of the freefall that may occur :


  • 2343$ — 38.2 fibonacci of 2008 - 2019 We better not close below that area, otherwise we break through the bottom of 2019's bullish movement. From there, we're forecasting the end of a weakly bearish retracement, if not a trend.

  • 2234-2111-1963$ — Those prices, while not being the most attractive, represent interesting low volume areas close if not onto the 2015-2016 range in which the market could setup short-term ranges (for a few days or weeks), Scalpers / Daytrader's paradise, Swing Traders and investor's nightmare. Why so ? Because we would be in the worst area for risk / profit ratio Weekly wise. The area between 38.2 and 61.8% is literally what we call the "Dumb Zone", it's not for nothing. Put your Risk/Reward ratio and see for yourself :


  • 1693$ — 61.8% retracement of 2009 - 2019 bullish trend confluent with 50% price drop since last market top. This is getting extremely interesting, personally i have buy order in the books at this exact price. If we reach that area, we're probably gonna range a looong time around it. Would we be able to go lower ? Quite unlikely but not impossible, see next level.

  • 1290$ — To me, this area represent both enormous opportunity and risk. This is the last chance for the US market to recover and start growing again. Any monthly close below that price and it's a multi-year bearish trend confirmed for those markets. Needless to say that, at this point the 1000$ on the SPX is gonna switch from major support to major resistance.


    Such a pricing of the SPX500 along with all other major US indices would mark the end of the US Dollar aswell as the United States hegemony over the rest of the world. This scenario is for Doomers only.

And that seems to be it

Hope this idea will inspire some of you !
Go easy on leverage and don't forget to hit the like/follow button if you feel like this post deserves it ;)

Kindly,
J.M.K

Comments

Great analysis

Request for cleaner charts, with no gridline and background, such that the levels are visible.

All the best @John_Maynard_Keynes !
+1 Reply
Thank you for your advice, i'll make sure to correct that in the future !

All the best to you too @avsrikanth
Reply
great technicals..
Reply
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