For a few weeks there have been unconfirmed rumors that the SP500 is going to fall… 😉 I myself was in the circle of these rumors, getting into shorts, while the index did not bother about my analysis, establishing another ATH. And today I finally made it and was able to close these unfortunate premature “Sell” with a small but positive profit. Undoubtedly, the threat of a coronovirus pandemic and the decline in production in many Asian countries due to the closure of industrial plants, as a result of the disruption of the supply chain from China, are contributing to the decline.
Looking at the index charts we will notice that the first signs of weakness appeared last week. In the H4 chart, a rising wedge formation appeared, from which the bottom was broken down on 18 February. Then we watched a re-test of the defeated wedge support from underneath and the subsequent drops, which today took on dynamics.
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If we look at the daily chart we can see a bearish engulfing pattern, from which the index fell today with great momentum, the Asian session opened with a downward gap.
All indications are that we see the long awaited downward correction on SP500, the likely supply target may be 3115. The downward scenario is supported by bearish divergence on the daily chart.
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