The EU’s antitrust lawsuit is sending jitters among investors in tech stocks, causing the S&P 500 to shed nearly 0.8% on the day.
This Tuesday, the EU Competition Chief filed an antitrust lawsuit against Amazon, alleging it was using its unique tools to outmuscle retailers on its platform. The company is one of the big tech companies that have flourished under the coronavirus pandemic, as lockdowns forced shoppers to move from the supermarkets and shops to online retail platforms such as those run by Amazon.
Tuesday’s drop has virtually wiped out the gains seen in Monday’s risk-driven rally, as investors shed tech stocks from their portfolios. The Communication Services and the Technology indices on the S&P 500 were major losers today, shedding more than 1% of their values in early NY trade. Other stocks that are on the decline today include the hospitality and cruise liner stocks such as Carnival Corp and Royal Caribbean Cruises. Monday’s coronavirus vaccine news had helped drive massive gains in these stocks, but that seems to have waned.
The US markets are also becoming more cautious of a Joe Biden win after the Attorney General of the United States, William Barr, cleared the US Justice Department to begin an unprecedented pre-inauguration election probe.
Technical Levels to Watch
Tuesday’s drop is now performing a pullback retest on the 3528.9 former resistance-turned-support, which also rests on the upper edge of the triangle identified in yesterday’s analysis. The closing price of today’s candle needs to stay above this level to confirm the breakout. A penetration close below 3528.9 invalidates the breakout and opens the door for a further retreat towards 3481.6. 3393.5 and 3335.5 remain the viable downside targets below this area in the short term.
On the flip side, a close above the 3528.9 price area could confirm the breakout, opening the door towards yesterday’s new high at 3646.0. However, it will take additional risk-driven rallies for the S&P 500 to press beyond this point. Occasional setbacks to downside targets that are formed from a role reversal of previous resistance areas can be expected if the push towards new highs is on.