After the March 2020 crash, the $SPX staged an impressive rally (along with other US indicies) that took price to new all-time highs. After a shallow correction in September, the $SPX managed to stage another rally. However, this rally failed to take out the new August highs. This was the first signal that a move lower could possibly be in the works.
The 3400 level on the $SPX was former resistance marking the former highs in February of this year. So after the break to new highs in September, investors needed to see the 3400 level hold, now, as support. Each break below this level has seen price dip into the green zone of support between 3330-3350 with a move lower into the 3200 support level.
Yesterday’s weak close below the 3400 level was a second clue that lower prices were in store. The first signal was the failed high after price recovered back above 3400 the day before. Today’s gap lower at the open should move the $SPX to 3200. As we move into more uncertainty (as explained in yesterday’s analysis of $GBPUSD), this will be the level to watch. A move lower still will cause investors to panic and the Federal Reserve to act again.
Because of the monetary stimulus and central bank activity in markets right now, I honestly did not think markets would move lower. So it is nice to see this development today as I am a firm believer in natural market forces being allowed to prevail, no matter the pain. I know lol. So I welcome today’s price action. Price can move lower still and it would still only be a healthy correction of the past 6-month rally and move price into those Fib levels. That remains to be seen.
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