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Chart Of The Day: S&P Poised To Hit Fresh Yearly Lows

By Fawad RazaqzadaStock MarketsSep 27, 2022 06:52AM ET
www.investing.com/analysis/chart-of-the-day-sp-poised-to-hit-fresh-yearly-lows-200630349
Chart Of The Day: S&P Poised To Hit Fresh Yearly Lows
By Fawad Razaqzada   |  Sep 27, 2022 06:52AM ET
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  • No fundamental justification for a market bottom yet
  • Dow has broken its corresponding summer lows, S&P likely to follow suit
  • Lower lows and highs mean short always preferred over long trades

Although US futures have managed to bounce back after a bruising few days, there’s no fundamental—or indeed technical—justification for a market bottom yet. Thus, expect the downtrend to resume.

More on the fundamentals later, but given the lower highs and lower lows, and not to mention all the other bearish technical indicators, I continue to prefer looking for short setups on the indices than long, even if the markets are a bit oversold in the short-term outlook. 

With that in mind, I reckon there is a good chance the S&P 500 futures and European markets will be unable to hold onto their gains, or at best move significantly higher from current levels.

S&P 500 Daily
S&P 500 Daily

In fact, following this morning’s rebound, the S&P 500 futures have now arrived at a key short-term resistance area, with the base of which coming in at 3723 (see shaded area on the chart). Previously this area was support in mid-July. But following the sell-off on Friday, this area is now going to be the first line of defence for the bears. 

With the Dow already making a new low for the year, it is likely that the S&P and Nasdaq would follow suit. Thus, as a minimum, I reckon the S&P futures are headed below the June low of 3639, where people buying at “support” yesterday will have placed their stop orders. A run on these stops in a sharp move is what is likely to happen next. So, watch out below!

If the S&P breaks and holds below that summer low, then we could see fresh technical selling in the days to come, with the index then possibly making a move towards the 127.2% Fibonacci level at 3452 next. 

Prior to today’s small rebound, the markets had been falling for 5 consecutive days. While some might be tempted to look at opportunistic long trades from short-term oversold levels, it is clear that the bigger and more frequent moves have been to the downside. We are in a bear trend, so it is best to go with the flow than against it. 

I am not a perma bear, it is just that there are no sound fundamental reasons for investors to pile in on the long side just yet.

For the markets to bottom out, either stock prices will have to get even cheaper to warrant the risk, or something has to change fundamentally. Right now, central banks around the world, led by the US Federal Reserve, are tightening their monetary policies aggressively, while concerns about the health of the global economy continues to rise. What’s more, you have emerging market currencies imploding, while currencies of some of the top economies are hitting either multi-decade lows or in the case of the British pound, new all-time lows. The slumping foreign exchange market is only going to exacerbate the inflationary problems in those nations and hurt demand for US exports.

Disclaimer: The author currently does not own any of the instruments mentioned in this article.

Chart Of The Day: S&P Poised To Hit Fresh Yearly Lows
 

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Chart Of The Day: S&P Poised To Hit Fresh Yearly Lows

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Comments (10)
Meself Meself
Meself Meself Sep 29, 2022 2:58AM ET
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nice article fuqwad
Saun Melkon
Saun Melkon Sep 28, 2022 4:20AM ET
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The stock market is pure FRAUD: stock prices are based LIES. Instead of debating whether stocks will go up or down, the stock market should be CLOSED. The bankers know how much money you have and what you're betting on -- they can see your bank account and your brokerage account. So the bankers will wrongfoot you REGARDLESS of actual economic data, simply by moving the markers against what the majority investor position is. In other words, the bankers are operating based on INSIDER TRADING which you simply cannot beat. The most likely outcome is; they'll scare you into selling your shares and your commodity positions, and prevent you from making too much money on the short side (largely through extreme volatility and NOT via significantly lower prices). When they can see that 70-80 percent of investors are OUT of the markets and sitting on cash, they'll suddenly lower interest rates and/or inflate the money supply (disguised as benevolent financing of stimulative government spending
Fred Berdach
Fred Berdach Sep 27, 2022 12:50PM ET
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Sound level headed analysis , congrats
Casador Del Oso
Casador Del Oso Sep 27, 2022 9:32AM ET
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Excellent article
Muhammad Asif
Aseeph Sep 27, 2022 9:26AM ET
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Technically at this market make some +tive corrections.
Vnod Be
Vnod Be Sep 27, 2022 9:25AM ET
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it's buy the dip now..
Casador Del Oso
Casador Del Oso Sep 27, 2022 9:25AM ET
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Beware the falling knife
Janne Huiskonen
Janne Huiskonen Sep 27, 2022 9:07AM ET
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Isn't that tightening already known and, hence, in the prices?
Juan Pablo Medina Valencia
Juan Pablo Medina Valencia Sep 27, 2022 8:52AM ET
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I just closed in that position this morning, thank you very much for your analysis
Giovanni Chirulli
Giovanni Chirulli Sep 27, 2022 8:20AM ET
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Thanks for your analysis.Giovanni, Italy
Wheel Nuts
Wheel Nuts Sep 27, 2022 8:11AM ET
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Futures are very much like the song of sirens.
 
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