Door Open for Lower Stocks

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.

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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