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The S&P 500 “Broken W” Path Out of Recession

The S&P 500 “Broken W” Path Out of Recession

Posted April 20, 2020 at 10:45 am
Neil Azous
Rareview Macro

The below visualization captures the key talking points regarding the path of the S&P 500. This illustration highlights four potential outcomes:

  1. The next short entry point technically is the 61.8% Fibonacci retracement level – SPX 2934. We expect shorts to be established at this level. While we do not surf, the 61.8% retracement is also the most critical level in Elliott Wave Theory. The key point here is that there would be a convergence of two well-used technical disciplines.
  1. Professionals being forced to chase higher prices (i.e., “pain trade”).
  • This is what is currently trading – see the green dotted line. The “pain trade” to 61.8% Fibonacci retracement level – SPX 2934 – is the next target.
  1. That the S&P 500 enters a multi-hundred-point range trade for months as Fed stimulus is offset by economic and EPS weakness.
  1. A retest of the low after a “pain trade” higher would lead to the most suffering.
s&p 500 broken w path out of recession
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