My Downside Target for the S&P 500 Is…

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Investors took a decidedly risk-off stance on Thursday, buying U.S. Treasuries as the S&P 500 dipped back into negative territory for the year, falling 1.2%.

The market was pulled down by weakness in overseas trade, a downturn in crude oil prices and expectations of lower Q1 earnings.

All sectors of the S&P lost ground, led by financials (-1.9%), materials (-1.5%) and technology (-1.4%).

The health care sector gave back some of Wednesday’s gains, falling 1.1%, and the iShares NASDAQ Biotechnology Index (ETF) (IBB) dropped 1.7%.

The losses were not confined to the U.S. markets, as the Stoxx Europe 600 lost 0.8%.

Oil closed 1.3% lower at $37.26 a barrel on concerns about whether major producers will cap production. Gold was up 1.1% for the day at $1,236.20 an ounce.

The yield on the benchmark 10-year Treasury note fell to 1.70% from 1.76% on Wednesday as bond prices rose.

At Thursday’s close, the Dow Jones Industrial Average was down 174 points at 17,542, the S&P 500 fell 25 point to 2,042, the Nasdaq lost 72 points at 4,848 and the Russell 2000 was down 16 points at 1,093.

The NYSE Composite’s primary exchange traded 938 million shares with total volume of 3.8 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, decliners outpaced advancers by 3.4-to-1, and on the Nasdaq, decliners led by 2.8-to-1. Block trades on the NYSE increased to 5,386, up from 5,202 on Wednesday.

Dow Jones Industrial Average Chart
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Chart Key

Lower buying volume versus selling volume, a new MACD sell signal and the failure to hold above the intermediate resistance line signal lower prices for the Dow Jones Industrial Average. The next support is the line at 17,200 and the 200-day moving average at 17,117.

S&P 500 Chart
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Unlike the Dow, the S&P 500 has a major trendline failure that will likely lead to a test of the support lines and zones down to the 50% Fibonacci retracement at 1,950.

Like the Dow, the S&P 500 flashed a new MACD sell signal and sellers are increasing slightly.

Conclusion

Well, we knew that eventually there would have to be an adjustment or correction.

At this time, I am unable to make a prediction as to its extent. However, a common retracement, the Fibonacci Sequence, often provides an accurate line of reference. The assumption is that the market will correct 50% of the distance from a closing low to a closing high. And as mentioned, using this method on the S&P 500 yields a downside target of about 1,950, which is 4.5% below Thursday’s close.

But there are likely to be many stops along the way and plenty of opportunities for profitable trades.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/04/daily-market-outlook-downside-target-sp-500/.

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