The S&P 500 lost steam late in the closing session and ended up trading lower on the day, as an increase in US coronavirus cases at record levels continue to plague market sentiment.
Rising cases of the coronavirus infection in California have prompted authorities there to impose further business shutdowns. This re-echoes repeated warnings from the WHO that the coronavirus situation in many countries was worsening and could get far worse unless basic health guidelines were followed.
The US Independence Day holiday saw many beaches open and parties held across the nation. As I posted on this blog, these activities could end up causing a spike in coronavirus cases, and this is what is playing out.
The closing of restaurants, bars, movie theatres and social outing spots in California could be replicated nationwide, reversing gains made in critical economic indicators such as employment, manufacturing, retail sales and the GDP.
The S&P 500 closed 0.39% lower at 3155.2.
Technical Outlook for S&P 500
Our reference chart is the daily chart, which shows 29.8 points drop as the red bearish candle to the right. The candle hit an intraday high of 3235.3, which violated the 3228.4 resistance but was rejected immediately.
Our earlier outlook remains intact. Only a closing penetration of the 3228.4 resistance by at least two successive daily candles would form the higher highs needed to signal a continuation of upside recovery on the S&P 500 index. If this does not occur, then the uptrend does not continue.
However, what we now have is a double top, with the floor of the support zone at 2961.4 forming the neckline of this topping pattern.
Therefore, the price needs to breakdown the support zone for continued downside towards 2844.3 and possibly 2707.7. But if we see a breakout above 3228.4, this would negate the double top and the uptrend could continue to 3335.5 and possibly 3400.0.
Any other scenario means the S&P 500 is range trading between the support zone and the 3228.4 tops.
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S&P 500 Daily Chart
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