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S&P 500 Ends January With A Thud

The trading screens are blood-red on Wall Street, led by a 500-point loss in the DJIA. At about the halfway point of the U.S. session, the DJIA DOW (-515), S&P 500 SPX (-47), and NASDAQ (-117) are all deep into negative territory. For the time being, traders and investors are aggressively limiting risk ahead of the weekend break.

As we roll toward late-day trade, there are a few fundamental items to be aware of. First, the coronavirus scare is quickly evolving into a panic. On the heels of yesterday’s CDC report, the World Health Organization (WHO) has declared the coronavirus a “public health emergency of international concern.” This announcement has prompted Russia and Mongolia to close their borders and Pakistan to ban all flights from China. While not altogether unexpected, the heightened angst over the coronavirus continues to boost risk-off sentiment.

The second thing to remember for today’s late action is that it is the final trading day of the month. Thus far, it looks like a significant number of institutional players are taking profits out of S&P 500, DJIA, and NASDAQ intermediate-term longs. 

A portion of today’s negative price action may be attributable to end-of-month book balancing. However, the pre-weekend sell-off doesn’t bode well for Monday’s open.

S&P 500 Plunges Toward Downside Support

The chart below is a look at the March E-mini S&P 500’s weekly performance as of Thursday’s close. As you can see, things had remained fairly positive amid the coronavirus panic. That is all over now. Investors are running for the door and prices are well below yesterday’s settlement.

March E-mini S&P 500 Futures (ES), Weekly Chart
March E-mini S&P 500 Futures (ES), Weekly Chart

Monday’s open is likely to be a blockbuster for the March E-mini S&Ps. Here are two levels worth watching:

  • Resistance(1): Swing High, 3337.50
  • Support(1): 38% Macro Wave Retracement, 3153.25

Bottom Line: In the event that the bears dominate the March E-mini S&P 500 to open February, I will be looking to go long from just above the 38% Macro-Wave Retracement (3153.25). To execute, buy orders will be queued up from 3155.75. With an initial stop-loss at 3135.75, this trade produces 80 ticks on a standard 1:1 risk vs reward ratio.

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Shain Vernier
US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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