Let’s place fundamentals aside for a moment and look at the technical situation.
Right now, the S&P 500 is at a critical “technical” stage, its price hovering around 50% from its last highs and 50% from its most recent lows.
What does this mean? Simply that the bears who sold short around February 2 and the bulls who bought on February 9 are both experiencing a profit.
Which party will concede?
For technical analysis enthusiasts, we see the potential for a “measured move” which is clearer on the downside though a stronger case on the upside.
A measured move means that once a retracement has been confirmed, should it continue in the direction of the trend, it will extend beyond the most recent highs or lows by the exact same distance of the retracement.
So, if the High on Feb 2 was at 2872, and the low on Feb 9 was at 2532, and the current retracement stands at 2754, then the retracement (from low to current high) was exactly 222 points.
Based on that logic, which favors the short side, should the downtrend continue, it should extend below 2754 by approximately 222 points, which would land the target at 2310.
On the bullish side of things, the most recent base of support for the S&P 500 is at 2405 range (this is a reasonable assessment, but some technicians can arguably refute that as well).
But given this scenario, a low of 2405, high of 2872, and retracement low of 2754, the retracement would have been approximately 349 points, not quite a 50% retracement but some technicians might have considered it close enough.
Following the measured move logic, a continuing bull market would place the S&P 500 around 349 points above the high of 2872 which would be a target of 3221 but only for that particular “measured move” calculation.
Ultimately, the fundamentals will determine where the market goes from here, and its direction may not appear clear until its fluctuations, seen from hindsight, end up defining either a bullish or bearish trend.
But this is what traders—both on the bullish and bearish side—may be experiencing at the current moment. Those who sold and bought at those levels are in a profit. These are levels to watch (2872 and 2474).
One side will eventually give way, and that will be the losing side.
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