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S&P 500 and Nasdaq plunge to the lowest level of the year


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S&P 500 enters a correction while Nasdaq sits at nearly 20% lower from its peak.

1645745850898.jpg
Source: Bloomberg
 
 

Stocks market’s crush accelerated on Thursday due to the growing geopolitical tension amid more countries joining the party to impose sanctions on Russia. The European Union applied sanctions to 23 high-ranking Russians and U.S. President Joe Biden targeted the Nord Stream 2 gas pipeline builder that runs from Russia to Germany. Australia also shows great support for Ukrainian by calling the world to “stand up to bullies”.

S&P 500: Enter into correction

This week’s sharp decline has sent the S&P 500 into correction territory, defined as a 10% drop from a recent high, which can be traced back to the 13th of January at around 4748. By the end of Wednesday’s trading session, the index has wiped off all the gains from June 2021. Next support in view will be the start point for the six-month-long rally from June 2021 to December 2021, looking at around 4141.

The most recent lowest level in January at 4284 became the imminent resistance level for S&P 500 to challenge, which, if broken through, could bring the 4369 in prospect. However, it’s not safe to say that the index has reached its bottom from the technical point of view as the RSI indicator still have some room to move before its floor level.

1645746501683.JPGSource: IG
1645746764511.JPGSource: IG

S&P 500 Hourly Chart

Nasdaq: Drop nearly 20% from its peak

Nasdaq has dropped back to its lowest level since June 2021 and now sits at nearly 20% lower from its peak. If looking back on the past two-year journey, most corrections were no more than 15% lower. The only greater correction than the current one was in February and March 2020, when Covid initially shocked the world, Nasdaq was down by 32%.

Overall, the index is following the downturn tunnel formed since this year and well below all the major MAs. Currently supported by the lowest from last June with the next major support at around 12903. The closest pressure line can be found at 13851. Above that will be 14531, which is a combined pressure level from the 20-days moving average and the floor level of last July and October.

Looking at the weekly chart, the support from 100 MA is still valid. Weekly RSI is moving towards its lowest level since March 2020, meaning a near-term rebound could be on the cards. However, it might be too optimistic to expect a strong bounce as the trendline for RSI suggests a very tight space for the reading to move higher for the near-term.

1645747289217.JPGSource: IG

Nasdaq Daily Chart

1645747383636.JPGSource: IG

Nasdaq Weekly Chart

 

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Hebe Chen | Market Analyst, Australia
25 February 2022

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