Chart of the Day US500 (S&P500)

Chart of the Day US500 (S&P500)

Chart of the Day US500 (S&P500)

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US500 (S&P500) Seasonals add support to another corrective swing higher

US president Trump warned that it’s “going to be a painful two weeks” as New York deaths from Covid-19 exceeded 1000 (overtaking China’s Hubei province) and White House health official Birx tipped that up to 200,000 Americans may die from the virus. S&P500 retreated 1.6%, UST bonds rallied with the 10-year bond yield lower at 0.67% and both oil and gold prices declined overnight despite the month-end. This was despite the Fed’s announcement of a temporary repo facility that will allow other central banks to swap their UST holdings for USD from 6 April.

In terms of COVID-19, there have been further signs of stabilisation in the number of new cases in Italy, suggesting that the lockdown implemented by the Italian government is starting to work. There were 4,053 new cases in Italy over the past 24 hours compared with 4,050 the previous day. COVID-19 cases continue to rise sharply in the US, although Dr Fauci, the US medical specialist, said “we’re starting to see glimmers … just the inklings” that the social distancing measures were limiting the rise in new cases. But he cautioned that “we’re not seeing (a turnaround) yet.”

 

Although somewhat anecdotal it is worth mentioning that since 1950 April has from a seasonal perspective been the best month of the year for the SP500, in the last 20 years when March has been a down month April has ended higher in 10 of the 12 instances. Bear markets whilst appearing simple to trade are notoriously tricky to profit from due to sharp bear market rallies as per the historical overlay from DoubleLine Capital. It is incredibly important to pick your places to engage and set your absolute risk and honour it. 

From a technical & trading perspective US500 looks poised to correct the impulsive advance from the current crisis/cycle low. We now look for a corrective pullback to test potential support back towards 2400/2370. If buyers remerge here there is the potential to set another base target, a second leg of corrective upside to test the equality objective and 50% retracement of the entire decline at 2789/2826. This will be a key decision point for the next phase. A failure to defend 2370 will open a much deeper move to test 2364, this will be pivotal as through here would likely set up a retest/undercut of the March lows.  

 

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

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