S&P 500 Hints at More Downside Potential as Coronavirus Fears Overshadow Positive US Data


The S&P 500 looks poised to share the same fate of its Asian and European counterparts and finish today’s trading in the red. As of this writing, the stock index is in the red by over 3.60% at 2,490.8. Its technical setup also suggests that the S&P 500 has more downside potential.

Leading losses today is Delphi Automotive with a 30.46% loss. This follows after news that the company tapped its line of credit without permission from Brogwarner which acquired the company in January. Ventas comes in second in terms of losses at -21.19%. In third is tour operator Carnival being down by 19.51%. The company is in the red after it announced its need for a $6 billion credit line to weather the coronavirus pandemic.

Stocks are being dragged down by concerns surrounding the coronavirus. US President warned that the situation may get worse in two weeks. This comes after US health officials warned that deaths in the country may reach up to 240,000.

Not even better-than-expected data could help fuel the S&P 500 into the green. Earlier, the ADP Employment Change report printed at -27,000 for March. This number beat expectations of 150,000 in job losses. Meanwhile, the ISM manufacturing report topped its 44.9 forecast at 49.1.

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S&P 500 Outlook

On the daily time frame, it can be seen that the S&P 500 has recouped some of its losses. By drawing the Fibonacci retracement tool from the high of March 3 to the low of March 23, it can be seen that the stock index has pulled back to the area between the 38.2% and 50% Fib levels. When connecting the highs of February 20 and March 5, it can also be seen that the stock index is testing the falling trend line for resistance.

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A closer look at the 4-hour time frame would reveal a double top chart pattern. This is considered as a bearish reversal signal. And so, watch out for a strong close below neckline support at 2,465.1. A break below this price could mean that a sell-off to 2,177.0 could happen soon.

On the other hand, a  close above yesterday’s highs at 2,640.0 could indicate that there are still buyers in the market. This could mean that the S&P 500 may still have enough buyers to push the stock index to its March 10 highs at 2,880.0.More content