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    S&P 500 hovering dangerously above key support

    As we noted earlier, global equities have plunged today amid growing growth concerns and continues weakness in oil prices. In the US, the major indices are off by over 2-3 per cent each, led by sharp falls in consumer discretionary and financial sectors. The selling pressure could exacerbate if the indices break support. For the S&P 500, the key support is around 1820/30, which is where it bounced from in mid-January off. However, that move failed to materialise into a significant rally. Consequently, the index is once again heading back towards this key support area at the time of this writing. Although there is a possibility for another rebound here, some of the other major global indices have already broken their corresponding key levels and so the S&P could follow suit.

    As a reminder, the 1820-30 region marks the neckline of the long-term rounded-top bearish pattern. A decisive break below 1820 could pave the way for further sharp losses. In this scenario, the S&P could easily drop to its 200-week moving average, around 1789, or even the long-term bullish trend going back to the March 2009 low, around the 1750/7 area, before deciding on its next move. But potentially, there is a danger that this bullish trend line would also break down. If this happens, it could potentially clear the way for a drop all the way to 1575/6, the 2007 peak and 38.2% Fibonacci retracement of the entire 2009-2015 upswing.

    So, there’s still a lot of ground to be won by the sellers. However, while the S&P holds above 1820/30, there is an admittedly small possibility we may see another bounce of some sort, perhaps towards 1900 again. Conservative traders may therefore want to wait for the S&P to make it move before deciding on which side to be on. But as the near-term trend is bearish, expect any rallies to be short-lived until proven otherwise.

    Source: FOREX.com. Please note, this product is not available to US clients

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