S&P 500 Runs Into Resistance

After tumbling 260 points in 4 days S&P 500 index managed to find support 1860 area having reached its’ lowest point of 1833 (the lowest level since October of last year). You can see from the daily chart below that price of the security sits around 1980 level, which was previous technical support from 2014 December through February of 2015. We may say that the price has already recouped more than half losses in the last three days. It means we may see more resistance and roadblocks on the road that may stop the index from rising further. 

If you checked the hourly chart you would also see that price bumped into 200 sma and was not able to overcome it today. A bearish pin is also there on the hourly. On the other hand, intra day support is also clearly seen at 1950 area, which acted as resistance for three days (August 24, 25 and 26). When price fell to the area on the 27^th (briefly) a bullish hourly candle formed immediately. If the recent drop was a temporary thing, we may expect to see more consolidation at current price levels and then a rise back to 2040 (minimum), and maybe even to all time high. 

S&P 500 crashes and closes below 200 ema

As I wrote in my previous post S&P 500 might close below 200 ema on a daily chart and it did. This really accelerated the fall and the index went as low as 2011.60 today. Although some bounces are expected real support does not start till 1980-60 area. Bearish momentum is really strong. Bearish head and shoulders pattern on the weekly chart predicted the fall weeks ago. A lot of investors talked about it for a few years, but it looks that only now their worst predictions might be coming true. 

Despite the fact the fall to 1980 is highly unlikely today some fundamental data coming out from US might cause the index to continue falling lower till market close. You can see that other stock indexes have already joined the party and are falling too. Expect this process to continue till some fundamental data proves otherwise. By the way, US 30 has already broken its key support which was at 17000. If you are intending to go long, better wait for the market to show you when to do it. 

Possible risk event is: Markit Mfg PMI (AUG P) – Expected: 53.8, Previous: 53.8. 

S&P 500 daily chart

Reversal pattern in S&P500

Stock indexes, including S&P 500 have been going up since 2009 with no major reversals since 2013. Looking at a weekly chart we can see that the picture might be turning bearish bit by bit. You can clearly see that since February, 2015 price wasn’t really advancing upward. On the contrary, a visible head and shoulders pattern is present on a weekly chart. 2120-2150 was the area where price of the index would be rejected again and again. This can lead us to a mildly conservative conclusion that a collapse in stocks might be coming sooner rather than later. 

We would not claim that if there were not any signs of that. But now signs are there clearly seen on the weekly chart and price action confirms an upcoming crash. It would be difficult to say how far and how fast the price will go, but taking into account all uncertainties in Europe with countries compiling huge public and private debts (US leading the way) it might be time to quite trading risky assets and jump into more conservative ones like gold or Swiss Franc. 

We can also see that 50 sma on a weekly acts as support, but nobody can be sure for how long. 

S&P 500 weekly chart

A daily chart also displays an attack on support where 200 sma and ema indicators are. In fact, we might see a daily price close below these two important indicators. That would be a very bearish signals. We did see two of those within a year and nothing really happened.  But again, you can never know when the signal will work.

Anyway, more and more bearish signals appear in the market and not only S&P 500, but European, Asian and other stock markets will turn down soon. Chinese Shanghai index could lead the way as the Chinese government is trying to slow down the collapse now. I doubt if they are able to combat powerful forces of financial market. So, let’s wait and see what happens. 

S&P 500 daily chart