My October 20th post noted the S&P 500 (SPX) had potential support in the low 3400 area, subsequently that support was broken. Today 10/28/20 was a big down day for US stocks.
The daily SPX chart courtesy of Trading View shows sell signals from two momentum indicators.
The daily MACD has a bearish crossover and the lower line – in blue has gone below the zero level. The daily RSI is now at 35% and below the 37% reading made at the 09/24/20 low. This implies price could soon be trading below the bottom at 3209.50.
There are two levels the SPX could be targeting. A Fibonacci .382 retrace of the March to September rally is near SPX 3060, however there’s a more interesting target near SPX 3163. This is a market profile value area and is close to a Fibonacci coordinate.
The 09/02/20 to 09/24/20 decline was 378.60 SPX points. The 10/12/20 lower top was 3549.90 minus 378.60 targets 3171.30 only eight points above the value area.
There’s also a potential Fibonacci time cycle of equality. The decline from 09/20/24 was fourteen trading days. Adding fourteen trading days from the 10/12/20 top targets 11/02/20 which is the day before the US elections. If the SPX is in the zone of 3163 to 3171 on 11/02/20 an important bottom could be forming.
Traders went long non leveraged SPX related funds on the open of 10/07/20 at SPX 3384.60 with a stop loss for half the position at 3323.70, and a stop loss for the second half at 3294.00. Today 10/28/20 the first half stop was triggered which was a 1.78% loss or .90 on the half position. The second stop at 3294.00 was also triggered resulting in a total loss on the trade of 2.25%.
Traders stay flat on the SPX, lets watch and see what happens over the next few trading days.