20% higher - What comes next for the S&P 500?

Another eye-popping performance by the S&P 500 as it closed over 6% higher on the session, taking its gains from Mondays low to just under 20%. The last leg of the rally coming as the U.S. Senate finally passed the U.S$ 2tn fiscal stimulus package and relief that U.S jobless claims at 3.283 million, were somehow less than feared. With just three trading sessions left now until end of month and end of quarter and after significant underperformance, U.S. equity markets are likely to be supported early next week as portfolio managers sell bonds and buy equities to rebalance.

Another eye-popping performance by the S&P 500 as it closed over 6% higher on the session, taking its gains from Mondays low to just under 20%. The last leg of the rally coming as the U.S. Senate finally passed the U.S$ 2tn fiscal stimulus package and relief that U.S jobless claims at 3.283 million, were somehow less than feared.

With just three trading sessions left now until end of month and end of quarter and after significant underperformance, U.S. equity markets are likely to be supported early next week as portfolio managers sell bonds and buy equities to rebalance.

Beyond there, we see future support for stocks and also to our theory that the market is close to or may have already turned the corner for now, from the huge amount of central bank and government stimulus announced in recent weeks. Designed to provide a cushion to the run of bad economic data which commenced in earnest this week and is expected to continue in coming months.

That doesn’t mean we are expecting a full and immediate recovery back to the all-time highs and to where markets where in late January – far from it. This would ignore the risks that a greater than projected increase in the number of Covid-19 cases globally might present in coming weeks.

Looking at the daily chart of the S&P 500 below, the current rally has room to extend another 7-10% higher, towards the 50% Fibonacci at 2785 and possibly towards the February low at 2853.25. Anything above the 61.8% Fibonacci at 2930 would go a good way to suggesting a medium-term low is in at 2174 and give reason to look for higher targets. However, let's deal with that bridge if and when we get to it. 

In the short term, the view is the current rally has room to continue towards resistance 2784/2853.25 area. It is from this area we expect to see sellers emerge and at the very least a modest setback to evolve from. 

 

Source Tradingview. The figures stated areas of the 27th of March 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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