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Support Levels to Watch in the S&P 500 as the Sell-Off Continues


Nov. 20 2020, Updated 5:00 p.m. ET

The broader market sell-off

The broader market has continued to trade on a negative note today. Market mayhem triggered by rising bond yields has worsened as tech investors have led the sell-off.

As of 12:30 PM EDT on October 10, the S&P 500 Index (SPY) has fallen 1.4%, the Dow Jones Industrial Average (DIA) has fallen 1.4%, and the NASDAQ Composite Index (QQQ) has fallen 2.0%. Investors’ fears about America’s ongoing trade war with China have added to the negative sentiments.

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S&P 500 Index

On October 4, we published our second technical outlook pointing toward a potentially steep market correction. In our first technical outlook article in August, we warned of an unfolding bearish technical pattern called the “rising wedge,” which was confirmed by the broader market weakness on October 4.

At 12:30 PM EDT on October 10, the S&P 500 Index was trading at 2,840. After violating its prior trendline support near 2,910 on October 4, the S&P 500 Index is continuing to trade on a bearish note. In the chart above, the index’s price action is represented by the moving blue line. The moving green line and the moving red line represent the index’s 50-day and 200-day simple moving averages, respectively.

The index’s value has already fallen below its 50-day simple moving average, which could now act as an immediate resistance level. On the downside, an immediate support level lies near 2,780–2,790 followed by a key support level at 2,670. A violation of the 2,780 support level could attract further sell-offs toward 2,670.

The index’s 14-day setup RSI indicator is 31.7, on the verge of entering oversold territory, reflecting weakness in its momentum.

Most auto stocks are also feeling the heat

At 12:30 PM EDT, Fiat Chrysler Automobiles (FCAU), Ferrari (RACE), and Tesla (TSLA) were down 4.2%, 7.4%, and 2.7%, respectively. In contrast, Ford Motor Company (F) and General Motors (GM) were still in positive territory with rises of 0.4% and 0.1%, respectively.

In October so far, Tesla stock has largely traded on a negative note. Read Three Reasons Tesla Stock Could Be an Attractive Prospect to learn more.

To learn what’s in store for the markets in October, read October Should Be Full of Thrills and Chills.


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