The S&P 500 may be due for a counter-trend reaction, according to Robin Griffiths and Ron William, technical strategists at RW Market Advisory.
Griffiths and William say that the S&P 500 is coming up against 8-year trend resistance which, together with historically overbought conditions, could mean downside targets of 2,440-50 (the 200-day / 40 week moving average) and then 2,100 (the lows of 2009).
They realise that such a move would be unusual for this time of year. More normally there is a “Santa Claus rally” during the months of November to January, but Griffiths and William say that this year could be different, primarily because there has been no autumn market setback.
Moreover, Griffiths and William point to the “elephant in the room”; namely, that the S&P 500’s rise of 300 percent has been fuelled by a few key stocks covered by the acronym FANG (Facebook, Apple, Netflix and Google or Alphabet). According to their analysis, Facebook is now under pressure and if it, or another FANG stock, were to have a setback they think the entire index would drop rapidly.
Read the full report.