After five consecutive declines, the S&P broke below the key support level of 5050
The S&P 500 index has fallen for five consecutive days, breaking below the key support level of 5050 points. The market may be facing a significant technical sell-off. Due to geopolitical concerns and CPI data, the market retreat has reached its largest scale since 2015. The next support level may be around 4900 points. Goldman Sachs' trading department has also expressed similar concerns, expecting the market to face dual pressures from geopolitical risks and increased supply
On Thursday, the S&P 500 index recorded its fifth consecutive decline, breaking below the key support level of 5050 points. Lawrence G. McMillan, President of McMillan Analysis, believes that this has significantly changed the overall investment direction.
At the same time, major U.S. stock indices are experiencing the largest pullback since September 2023 (just before the Fed's pivot).
McMillan stated that the range between 5050 and 5180 points was a strong support level when the S&P 500 index hit a historical high at the end of March. However, the market failed to halt the selling wave triggered two weeks ago by CPI data, and with escalating geopolitical concerns, this selling wave continues. Once the S&P 500 index falls below 5050 points, the market may face a significant technical sell-off.
Currently, there is resistance around the 5150 point and near the historical high point area of around 5260 points. The next support level may be the gap fill point near 4900 points for the S&P 500 index. Furthermore, 4800 points is an important support level, dating back to the peak of 2022 two years ago.
In addition, on Thursday, the S&P 500 index closed below its Modified Bollinger Band (mBB) -4σ line, preliminarily indicating a potential buy signal for the McMillan Volatility Band (MVB), but this is not certain. Initially, a "classic" mBB buy signal will appear when the SPX closing price is above the -3σ band. However, to trigger a complete MVB buy signal, greater upward momentum is still needed.
Goldman Sachs' trading department also expressed similar concerns. They pointed out that the current market is influenced by the Fed's hawkish policy and strong macroeconomic data, especially mentioning that the key level of the 2-year Treasury yield approaching 5% is being tested. As the weekend approaches, the market is expected to face dual pressure from geopolitical risks and increased supply next week.
Julian Emanuel, a strategist at Evercore ISI, said, "Although setting targets below the current market price is unsettling, our analysis still points to the same trend"He emphasized that the current high valuation leads to poor expected returns.
Emanuel further pointed out that the average pullback in non-recession years is 13%, and believes that ongoing cost pressures and uncertain monetary policies may lead to further market declines.
Emanuel also discussed recent market trends, especially the overheating situation of momentum stocks in March when they reached their peak. This phenomenon is partly attributed to the great enthusiasm of the public investors for the stock market and record fund inflows. "We now believe that investors may adjust their optimistic expectations and reevaluate the market to some extent."