GFC, Corona, Fibonacci and S&P500 as of Now: this is the topic of our Blog Post this week. In this post, let us highlight the similarities between Market conditions during GFC and Corona virus pandemic. We will analyse the 2 situations (GFC and Corona) for the world’s biggest stock index S&P500. We will demonstrate these conditions through the use of the powerful Fibonacci Ratio (0.618 or 61.8% which is the inverse of the Golden Ratio 1.618 or 161.8%).
As we all know by now, during GFC (2007-2008), S&P500 corrected itself from the high of 1,575.75 to a low of 666.43. This was a correction of 57.71% or 909.32 points in 1 year and 4 months. During Corona virus pandemic, S&P500 has corrected (so far) from the high of 3,397.20 to a low of 2,184.31. This is a correction of 35.70% or 1,212.89 points from the top in only 1 month and 3 days.
Now the Similarities between Market conditions during GFC and Corona virus pandemic: On 26-Apr-2010 during recovery from GFC, S&P500 faced the resistance at 61.8% Fibonacci Level which was at 1,228.39 (refer left hand side of the chart). Exactly from that point and that day, S&P500 came down 16.75% or 203.25 points during next 2 months and 4 days. Now during Corona virus pandemic, S&P500 is facing the same resistance at same 61.8% Fibonacci Level which is currently at 2,933.88 price level. S&P500 has already interacted and is now, at the time of writing this blog post, interacting with this 61.8% Fibonacci Level at 2,933.88. From 29th April 2020 till date, during Corona virus pandemic, price of S&P500 has got rejected 2 times from the 61.8% Fibonacci level as below:
1. first on 30th April 2020 and then on
2. 11th May 2020.
Within last 5 days of during Corona virus pandemic i.e. from 18-May-2020 till 22-May-2020, S&P500 has closed once below the 61.8% Fibonacci level and 4 times above the 61.8% Fibonacci level.
Now the big question: is S&P500 going to repeat the same price action during the Corona virus pandemic as it did during GFC? Or this time S&P500 will follow some other way and do something different than that of GFC?
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S&P 500 stock market index (SPX500, SPTRD, SP 500 or US500) is at Multiple Resistances. What to Expect Now? Let us throw some insights into the important question.
After a tremendous and rapid drop from the all time high of 3,397.20 to 2,184.31, S&P 500 stock market index (SPX500, SP 500) is now facing multiple resistances.
The drop from 3,397.20 to 2,184.31, S&P 500 stock market index (SPX500, SP 500 or US500) is a massive 1,212.89 points which is equal to 35.70% drop in value. This massive drop for S&P 500 stock market index (SPX500, SP 500 or US500) happened in only 22 daily bars from 20-Feb-2020 to 23-Mar-2020. After that S&P 500 stock market index (SPX500, SP 500) has rallied till the time of writing this post to 2,879.57.
Now at this level of 2,879.57 S&P 500 stock market index (SPX500, SP 500 or US500) is facing the following resistances as shown in the chart below:
1. 200 period daily exponential moving average
2. 61.8% Fibonacci level
3. Also we observe a Crack & Snap Back phenomenon at point 1 and 2 above.
Now if S&P 500 stock market index (SPX500, SP 500 or US500) is closing below 2,869.09 on a daily basis and its low is taken out then our price objectives are as below:
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