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S&P 500 technical analysis for March 9 to 13: index could plummet to 2730 this week

By Rakesh Upadhyay

Will the selling resume this week? Let’s analyse the weekly and daily charts to find out.

The S&P 500 has dipped from lifetime highs to correction territory the week before. This shows that selling due to coronavirus outbreak has been vicious. The markets are nervous as the virus continues to spread across the world and threatens to disrupt the fragile global economy.

Though the US Federal Reserve cut interest rates by 50 basis points last week, it was not enough to prop the markets higher. This shows that the market participants expect additional action by the Fed, with expectations of a further 75 bps cut being built for the March meeting.

The markets will also be closely watching the ECB’s response to the crisis as Italy, the third-largest eurozone economy, is severely affected by the coronavirus outbreak. While the fundamentals look weak, does the technical also point to further weakness? Let’s study the weekly and daily charts to do the S&P 500 prediction for this week.

S and P 500 technical analysis: weekly chart

The S&P 500 has been witnessing large volatile moves for the past two weeks. This shows confusion among the bulls and the bears about the next directional move. The bulls have been buying the dip expecting the uptrend to resume, whereas the bears have been selling aggressively trying to sink the index into bear market territory.

The sharp decline in the week before has broken below the 20-week EMA and the 50-week SMA. Though the bulls arrested the fall last week, they have not been able to force a sharp relief rally, which shows that the sellers are active at higher levels.If the bears can sink and sustain the index below 2853.7, the downtrend will resume. There is support at 2722.1 and below it the 200-week SMA at 2632 is the critical level to watch out for. We expect the bulls to defend this level aggressively.

Alternatively, if the bulls do not allow the index to sustain below 2853.7, it might attract further buying and a sharp relief rally is possible.

The analysis of the S&P 500 weekly chart shows that bears are in command but the selling looks to have been overdone in the short term. Let’s analyse the S&P 500 daily chart to see whether the traders can expect a relief rally and if selling will resume this week.

S and P 500 analysis: daily chart

The S&P 500 analysis of the daily chart shows that the bulls are struggling to push the index back above the 200-day SMA. This shows selling by the bears at higher levels.

Both the 20-day EMA and the 50-day SMA are sloping down and the RSI is in negative territory, which suggests that bears have the upper hand. If the bears can sink and sustain the index below 2853.7, the downtrend will resume. The next medium-term target to watch on the downside would be 2593.1.With the futures pointing to a sharp gap down opening, the markets are likely to slide below the critical support at 2853.7. However, it would be interesting to note whether the bears can extend the losses or if the bulls use the dip to buy.

If the index reverses direction and rises above 2853.7-2900 level by the close, it would signal buying on dips by the traders as they expect a turnaround. Conversely, if the bulls fail to push the price back above 2853.7-2900 level, it is likely to result in long liquidation that could result in a quick fall to 2776.7 and below it to 2729.2.

Do we find any tradeable ideas for this week? Let’s find out.

S and P 500 price analysis this week: Mar 9 to 13

We had warned investors that the market was looking toppy in our earlier analysis. The traders who follow us would have been saved from the severe drubbing of the past few days.

After the recent fall, though the stocks look attractive, the index is still not giving the confidence that the bottom is in place. Therefore, traders should wait for the markets to stabilise before buying anything.

FURTHER READING: Should I invest in index funds?

FURTHER READING: Three ways to make money with stock index investing

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