- The market struck an important target this past week in the SPX.
- There is still much support below this market.
- How the market handles the 3100 region of support will tell the story for the rest of 2020.
- This idea was discussed in more depth with members of my private investing community, The Market Pinball Wizard. Get started today »
Throughout recent history, we have had many reasons as to why people unfortunately die. It is simply a part of life. Some people are blessed with living to a ripe old age, whereas others are struck down in what would seemingly be the prime of their life. There really is no rhyme or reason to any of it.
Yet, the news media has now convinced the marketplace that the stock market has begun a decline because of an outbreak of a virus in China. This is now beginning to sound like Ebola 2.0. Do you even recognize how many more multiples of people unfortunately die from the flu virus on an annual basis? When was the last time we saw the news media blame the flu for the cause of a market drop?
In fact, just take a look at this chart to see how ridiculous it is for the new media to be attributing the cause of the current drop in the stock market on a health matter:
The main reason why the media has to report that the market is dropping due to fear of this virus is because they simply cannot find any “rational” reason for fear to grip the market and cause the recent selling we have seen. Unfortunately, the market is not a rational environment, but please do not tell most market participants. For if they truly understood this fact, it would put the financial news media out of business.
Over the last several months, I have had to adjust my analysis when the market broke out through the resistance region I was tracking. And, over the last several weeks, I outlined to the members of The Market Pinball Wizard that should the market continue to hold the smaller degree support levels we were outlining, then the next major point of confluence would be the 3338SPX region. This target was identified by several overlapping Fibonacci mathematical calculations of varying degree. And, much of our analysis for the remainder of 2020, and even beyond, would center around how the market would react at the 3338SPX region.
For those that track the market closely, you would likely know that the high struck this past week was 3337.77 before we turned down. While we do not always see the full reaction we expect when we strike points of important mathematical confluence, the market almost always provides us with a significant reaction. That is what we saw this past week.
In the bigger picture now, we have a support region in the SPX between 3105-3195SPX. Moreover, the ideal target for a pullback, should we continue lower in the coming weeks, would be the 3155SPX region. To me, this support region will tell us all we need to know for the rest of 2020.
You see, for years I have expected that this bull market which began in 2009 would take us to the 4000 region in the SPX before it completed. While I did not expect us to be pointing towards this target this soon, as long as the market holds that support region over the coming weeks, it likely points us to the 3700-3800SPX region in 2020, with 4000 likely be the target for 2021.
However, if the market is unable to maintain that support within this pullback, it will again raise the probabilities of seeing the 2200SPX region before we see the 4000 region.
For now, the market has drawn its lines in the sand, and is providing us rather clear guideposts for 2020. As I said last year, the action in the first quarter of 2020 will set the tone for the rest of the year.
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