‘Markets Don’t Hit Bottom on Friday’: COVID Stock Rout puts these S&P 500 levels to the fore next week

After U.S. stocks suffered a sharp Black Friday drop following the discovery of a rapidly spreading variant of the coronavirus that causes COVID-19, chart watchers are trying to gauge how deep the pullback could be .

“While we are looking for a pullback, it’s hard to predict how quickly it will unfold,” senior technical analyst Mark Arbeter of Arbeter Investments said, noting that, often, “downward panic moves accelerate or shorten the duration of the withdrawal “while potentially erasing the” obscene “positive sentiment levels that accompanied the rally.

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While it is not clear to what extent the new variant discovered in South Africa will prove to be transmissible or deadly, investors on Friday ditched stocks and other assets perceived to be risky, crowding into safe-haven assets such as treasury bills and gold.

Read: WHO names South African coronavirus variant ‘omicron’ and designates it as ‘variant of concern’

The S&P 500 SPX fell 106.84 points, or 2.3%, to 4,594.62, its lowest level since October 27, leaving it just over 2% of its closing high on November 18.

Market Snapshot: Here’s what the Black Friday carnage could mean for stock trading on Monday, analysts say

The Dow Jones Industrial Average DJIA,
fell over 1,000 points to its session low and ended the day down 905.04 points or 2.5%, for its biggest one-day percentage price and 2021 percentage drop . The Nasdaq Composite COMP,
fell 2.2%.

See: World acts as new variant of coronavirus emerges in southern Africa

Holiday trade terms have been blamed for boosting market movements; Stock trading closed at 1 p.m. Eastern time after U.S. markets closed Thursday for the Thanksgiving holiday.

In the chart below, Arbeter shows that the major support levels for the S&P 500 are grouped together.

Arbeter Investments LLC

“The probability of the market stopping in an area with multiple supports close together should in theory be higher than a random spot on the chart. While this doesn’t always work, this keeps us on our toes. Arbeter wrote.

The S&P 500 dipped to 4,585.43 and closed below the first support level identified by Arbeter at 4,634 – a 23.6% retracement of the index rally since October. He also removed the next layer of support at 4,600, the middle “Bollinger Band” on the daily price chart. Bollinger bands plot the standard deviation from the simple moving average of an asset.

Below that, the first group of support levels is found at 4,570, the exponential 50-day average; 4,566, the 38.2% retracement of the rally; and 4,550, a previous record in early September.

The second group starts at 4,525, the 50-day simple average, he said, and is followed at 4,512, a 50% retracement of the rally; 4,500, the middle Bollinger ban on the weekly price chart, and 4,490, the exponential 21-week average.

After that, trendline support hit the lowest since March is at 4,460, he said.

“The stock market took a left hook on Black Friday and wobbled into the weekend,” Arbeter said near the close, in comments emailed. “They say markets don’t touch Friday low. , so many are looking for a low early next week, “with the weekend headlines expected to be a major factor in Monday’s price movement.

Read also : World on alert as UK reports cases of omicron COVID variant

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