S&P500 - key to staying one step ahead

Mindful that a macro version of “tug of war” is currently driving equity markets. A surge in new COVID-19 cases in some U.S. states has resulted in a sharp increase in hospitalization rates and a sharp decrease in spare ICU beds, a key requirement to prevent an increase in the all-important fatality rate.

This has raised the possibility of a partial re-shutdown, bought more acutely into focus after Apple announced it would close 7 of its retail locations in Houston, Texas. It has also served to raise doubts about the potential for a V-shaped recovery, despite an impressive rebound in economic data and continued ultra-supportive monetary and fiscal stimulus.

Turning now the chart of the S&P500. Our base case remains that the price action that has followed the 3231.25 high is counter-trend rather than being part a reversal lower.

The 200 day moving average that currently sits 3015 area, remains the key near term downside support level, with a break and daily close below here and then the recent 2923.75 low opening the way for a further decline towards our preferred downside support 2850/30 area (the 38.2% Fibonacci retracement and the wave equality target).

It is in this region, I will be looking for a base to form in the shape of a bullish daily reversal candle in expectation of the uptrend resuming and a retest of the recent 3231.25 high.

**As a side note, after golds $25.00 fall from its highs overnight, that coincided with a -2.60% fall in the S&P500, should equities fall 5-7% quickly as they did in March, investors moved to cash and liquidated long gold and Bitcoin holdings.

Hence for those that followed our long gold trade idea from Monday, there is a strong argument to tightened the stop loss up to entry, or at the very least raise the stop to $1735.

Source Tradingview. The figures stated areas of the 25th of June 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation