SPX -What's next after historic drop?
$S&P 500(.SPX)$ suffered a huge drop of close to 156 points on Apr 29 close. All in all, it has dropped –13.3% from Jan 4 all-time-high (ATH) closing high of 4793.54, the worst start to the year since 1939 (see table below).
So what’s in store for the Index, widely regarded as the barometer of the overall US stock market, this coming week?
More Volatility
First, I’d expect volatility to remain high ($Cboe Volatility Index(VIX)$ last closed, 33.4) given more S&P 500 constituent companies reporting Q1 earnings, FOMC Meeting Fed rates decision mid-week, and NFP April jobs numbers to round off a big week.
History Lessons
Historically, based on $SPDR S&P 500 ETF Trust(SPY)$, the one day drop of – 3.7% at end of the month was the second worst since 1990s (see table below first column). What happens the next trading day, in our case today May 2 (third column) is anybody’s guess unfortunately, although on average it looks less likely, but just by a little, to be positive (46.15% chance). Something to be optimistic about is there is close to 70% chance we will end the month of May in positive territory (Following month % Chg, last column)
Trade the Price Action
In terms of price action, $S&P 500(.SPX)$ has been on a downtrend since ATH in Jan 2022 (see Daily chart below).
For upside scenario, price action shows a likely double bottom bullish pattern, which might give a bounce of potentially up to 85 points or about +2%, to 4200 round number level. However, price might drop below recent low of 4118.65 before rebounding. If the rally up has some legs, then next stop is likely around 4280, coinciding with 0.236 Fib level. $E-mini S&P 500 - main 2203(ESmain)$ index futures price is up around +0.4% at time of posting, and as price action has been respecting the Fibs levels well on Daily chart, there is a good possibility of an up day.
For downside scenario, price might break down (fake breakout) in regular trading hours (RTH) and fall further to 4080. As this level looks like a relatively weak support, price could likely drop all the way to 3960 (further –2.94% drop).
I’m ready for both scenario, and would trade based on price action, setting stops that are wider due to higher volatility.
Here's wishing you all a profitable trading week ahead.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
- CitizenBane·2022-05-03Let's hope so! "70% chance we will end the month of May in positive territory"3Report
- nimbly·2022-05-02Your strategy is very wise.3Report
- pixiezz·2022-05-02I think it is worth to bullish.3Report
- BurnellStella·2022-05-02The index is too weak.3Report
- MortimerDodd·2022-05-02I believe most people remain pessimistic at the moment.2Report
- YiCheng0301·2022-05-04I see this as a opportunity for me to be in advantageous position during wealth redistribution!2Report
- JntEu·2022-05-05Thanks for sharing and nice write up1Report
- juvefreak·2022-05-05Waiting for further dip2Report
- CET 789·2022-05-02[Cool] [Cool] [Cool] [Cool]1Report
- EvanHolt·2022-05-02Hopefully nasdaq will lead the market up.1Report
- surfer guy·2022-05-03Well, the upside scenario played out. As expected went lower to 4062 bit beyond 4080, then reversed up to as high as 4169. Lets see if it has some leg to reach 4200 or will it reverse Tue [Thinking]2Report
- surfer guy·2022-05-02My apologies, here's the updated post. Have to delete and repost due to some typos spotted. Have a good day and week trading and investing ahead!2Report
- 北纬1度线·2022-05-04[财迷] [财迷] [财迷]2Report
- GD Hazel·2022-05-05LikeLikeReport
- SandDust·2022-05-05GoodLikeReport
- MelChen·2022-05-05[Speechless]1Report
- Ra007·2022-05-04Good one1Report
- rL·2022-05-04[Strong]1Report
- FionaWu·2022-05-04I awe2Report
- Dave0123·2022-05-04ok1Report