Last week I analysed the situation on the S&P500 index indicating the possibility of further declines after closing the bearish gap. The quotations confirmed my assumptions and the index ended the week at 3229 losing 450p. When you look at the bearish candle on the weekly chart, you will notice that it was accompanied by a maximum on MACD and the oscillator entered the bearish phase.
Friday’s daily candle (see chart above) engulfed the Thursday’s range by creating a bearish engulfing pattern. In addition, the index remained below the upward trend line, confirming that it was defeated. The MACD on the day chart is still in the downward phase.
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Considering the circumstances I mentioned in the previous analysis, i.e. coronovirus in China and restrictions on movement in quarantine areas. Closing down of workplaces, in some cases by the end of February, the closed stock exchange by 3 February and huge losses in the transport and tourism industry, which could cause a fall in China’s GDP of at least 5%, will affect investor sentiment. Further falls in the index are rather unavoidable.
Looking at the charts from a technical point of view, level 3130 may be the first target of sellers, it is possible retesting the defeated trend line, so when planning the sell orders, one should consider placing the SL above mentioned pattern , that is around 3297.
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