Technical analysis - S&P 500 heads for longest losing streak in over 30 years.

Fast approaching the US election US equity markets will certainly come in to focus, I was originally planning to do a piece on the DOW however after a conversation with a client he focused my attention to the S&P and I am very glad he did.

First thing to note, we have broke the uptrend from February’s swing lows this can be seen by the red line on the weekly chart and the blue line on the daily chart. This breach has now put the integrity of the medium term trend at risk. What has been interesting of this breach is the levels it had to break to do so. For example the 2121 support was September and October’s swing lows  and pre-Brexit highs.

Once this level was breached on the 1/11/16 we have seen continual selling. Moreover what makes this breach more intriguing is that it also took out the 38.2% retracement of the Brexit lows and has now seen a breach of the 50% retracement of 2093 this highlights the strength of the bears in this market. Furthermore the daily RSI is now reaching oversold territory at 28.3. Typically below 30 indicates oversold and the last time the RSI was this low was back in February this year.

SP500_Nov4_2

This move to the downside thus far has failed to hold any potential support. As we can see by the daily chart price failed to hold the second test of the lower channel, as well as the 50% retracement and the 252EMA also, albeit this could change with today’s NFP numbers. Should the market find support at current levels 2085/90, due to it being technically oversold then the S&P will face significant resistance at the 2015/20 zone where the initial break of support occurred. If market pressure continues short term support could be found at 2068.9 the 61.8% retracement of the Brexit lows then a potential support could come in at 2047.6, which is the 38.2% retracement of the whole trend from February’s lows.

SP500_Nov4_1

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