Correction move coming? Is there a potential crash?
The major averages on Wall Street gave up their morning gains provided by strong earnings from Meta along with robust U.S. GDP Q2 figures which came in at 2.4% vs expected 1.5%, and higher than the 2.0% in the first quarter.
Meta reached a new 52-week high of $325.35 (up 8.9% from previous close) before ending lower at $311.71 to par back to gains but still closing up 4.4%.
There were concerns over possible stagflation scenario along with more monetary policy tightening to come in the wake of strong GDP numbers. Commentary from Fed Chair Jerome Powell was that the Fed staff no longer predicts a recession coming. He also said that no decision had been made to hike rates at every other meeting. Additionally, he firmly reiterated the central bank's 2% inflation target and stressed that there would be no rate cuts this year.
Treasury yields have moved following the GDP numbers, but during the Asian market on Friday morning, the U.S. 2 year is at 4.9%, while U.S. 10 year is at 3.9%.
US Treasury Yields as of Friday morning
SPX Support Levels
Let's take a look at possible retracement points for the S&P 500 to find the potential supports if indeed this is a correction wave.
The following is a Fibonacci retracement from March 13 to yesterday's session high.
The potential supports have been marked as S1, S2, S3. Support 1 at 4,325 comes in just under the 50 SMA, and also was the previous swing high of August last year, and also coincides with the dip at the end of June that found support at the 20 EMA. Support 2 coincides with a 50% Fib retracement, at 4,205 which is also the swing high from February this year. Support 3 at 4100, which is around 61.8% Fib retracement.
Of course there is also the likely possibility that traders will buy the dip on the 20 EMA or 40 EMA is tested.
Additionally, the August to September months are seasonally weaker for the markets, so investors who missed out on the huge run that the S&P 500 had made since last October would find this buying points as good opportunities to enter the market.
Lastly it is important that investors should note that there is always some bad news painted by the media or the doomsday prophets. If you trust the bad news, then you would never have dared to stay invested in the markets and would have always sold on any bad news. Instead you would like to do the opposite, which is to be greedy when others are fearful, and be fearful when others are greedy!
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Some believe that the recent sell-off in the stock market is a sign of a larger correction, while others believe that it is just a temporary setback.
Whether or not a correction or crash is coming is a matter of opinion, and there is no consensus among experts.
It is too early to say whether or not a correction or crash is coming.
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