With S&P 500 Heading Much Lower, Is This A Dip-Buying Opportunity?
Sunshine Profits | Sep 20, 2021 11:03AM ET
Stocks are breaking down! The S&P 500 index fell almost 1% last Friday and today it is down 1.7% by mid-morning. Are we getting close to a local low?
The broad stock market index broke below its short-term consolidation on Friday, as the S&P 500 index fell below its recent local lows along 4,450 price level. On Sept. 2 the index reached a new record high of 4,545.85. Since then it has lost almost 120 points. This morning stocks are expected to open much lower following big declines in Asia and Europe after news about Evergrande Real Estate Group crisis in China.
The nearest important ):
Dow Jones Is Leading Lower
Let’s take a look at the Dow Jones Industrial Average chart. The blue-chip index broke below a potential two-month-long rising wedge downward reversal pattern recently. It remained relatively weaker in August-September, as it didn’t reach a new record high like the S&P 500 and the Nasdaq. Today it may sell off to the 34,000 level or lower. The next support level is at around 33,250-33,500 and the resistance level is at 34,500, marked by the recent support level, as we can see on the daily chart:
Apple Breaks Below Upward Trend Line
Apple (NASDAQ:AAPL) stock weighs around 6.3% in the S&P 500 index, so it is important for the whole broad stock market picture. In early September it reached a new record high of $157.26. And since then it has been declining. So it looked like a bull trap trading action. We can still see negative technical divergences between the price and indicators and a potential topping pattern. The stock is breaking below an over two-month-long upward trend line.
Get The News You Want
September Last Year – S&P 500 Fell Almost 11%
In 2020, the S&P 500 index reached a local high of 3,588.11 on Sept. 2 and in just three weeks it fell 10.6% to local low of 3,209.45 on Sept. 24. This year, September’s downward correction has started from the new record high of 4,545.85 on Sept. 3, so there is a striking similarity between those two trading actions.
Conclusion
The S&P 500 index broke below its short-term consolidation on Friday and today it will most likely accelerate the downtrend from the early September record high. However, later in the day we may see some short-term/intraday bottoming trading action.
The market seems overbought, and we may see more profound downward correction soon. Therefore, we think that the short position is justified from the risk/reward perspective.
Here’s the breakdown:
- The market is extending its downtrend today, as the S&P 500 index is likely reach below 4,400 level.
- Our speculative short position is still justified from the risk/reward perspective.
- We are expecting a 5% or bigger correction from the record high.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.