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Has the Rally In the S&P 500 Index & US Markets Started to Wane?

After weeks of an endless rally that has survived a deluge of dismal jobs reports and data, the S&P 500 and other US markets started the week in a surprisingly muted mood. The S&P 500 is only down by What seems to be stoking the sudden caution investors are showing this Monday? Analysts believe that there are emerging jitters about whether the economy was reopening too quickly, too soon. Reports of new cases of the coronavirus in countries thought to have controlled the pandemic are fuelling these fears. China had reduced the risk-level alert in all regions of the country and eased its lockdowns of Wuhan and other areas. But a rise in new cases in Wuhan and Shulan, a town that borders Russia and North Korea is raising eyebrows once more.
Investors are worried that the coronavirus pandemic continues to remain a threat which could be re-ignited if lockdowns eased down. The US Presidency is mulling the idea of the disbandment of the US coronavirus task force.

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Technical Outlook for S&P 500

The crab harmonic pattern identified on the daily chart of the S&P 500 index remains intact, as the price action makes it way gradually to the resistance zone which exists between the 61.8% Fibonacci retracement and the 3028.3 resistance. The 200-period exponential moving average resides in this resistance zone and functions as a dynamic resistance. 

From the perspective of technical analysis, a reversal is expected at point D, deep inside the resistance zone. The price point in the harmonic crab pattern is at the 161.8% Fibonacci extension from wave XA. If this expectation is met, the price may continue the advance until it hits point D within the resistance zone, from where the price is expected to resume the decline. This decline may target the 2844.3, 2796.9 (50% Fibonacci retracement) and 2707.7 price levels.

However, if price surpasses the resistance zone, this invalidates the harmonic pattern and also paves the way for a further advance towards the 78.6% Fibonacci retracement at 3138.2. The cluster of lows found on December 6-11 are found here, lending further credence to this price level.