The S&P 500 index is trading lower as fears of a massive outbreak of the coronavirus infection hit Asian markets on Tuesday. Asian markets slipped into the risk-off mode as the coming Chinese new year celebrations, and the enormous cross-country travel associated with it fuelled fears that the coronavirus infection could spread massively throughout the region. Health officials have identified human cases in several Asian countries with at least four deaths recorded. Human-to-human transmission of the coronavirus was confirmed by the WHO recently.
The S&P 500 is now trading at 3317.5 as at the time of writing, following the Dow Jones Industrial Average and the Nasdaq Composite index lower. The US markets will look towards key earnings reports on Tuesday for uplift. The Q4 2019 earnings report for Netflix is due for release in the US market after-hours. I previewed this earnings report last week.
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Technical Outlook for S&P 500
After posting new highs almost weekly since November 2019, the S&P 500 hit the resistance at 3335.7 seen on the upper ray of the pitchfork on the weekly chart, but has failed to break that level and is now trading lower. The immediate downside target lies at 3263.3, which is the 100% Fibonacci extension from the Feb 2016 swing low to the Sept 2018 swing high. Further downside targets lie at 3117.3 and 3018.4 (July 2019 and September 2019 peaks) with the midpoint of the pitchfork also being a potential candidate.
The upside target to beat remains 3335.7, which is where the pitchfork’s upper ray intersects the price level. Today’s candle got as high as 3330.8 before pulling back. If price continues to pull back to the support levels identified above, buyers may target this level with new re-entries.