Add news
March 2010
April 2010
May 2010June 2010July 2010
August 2010
September 2010October 2010
November 2010
December 2010
January 2011
February 2011March 2011April 2011May 2011June 2011July 2011August 2011September 2011October 2011November 2011December 2011January 2012February 2012March 2012April 2012May 2012June 2012July 2012August 2012September 2012October 2012November 2012December 2012January 2013February 2013March 2013April 2013May 2013June 2013July 2013August 2013September 2013October 2013November 2013December 2013January 2014February 2014March 2014April 2014May 2014June 2014July 2014August 2014September 2014October 2014November 2014December 2014January 2015February 2015March 2015April 2015May 2015June 2015July 2015August 2015September 2015October 2015November 2015December 2015January 2016February 2016March 2016April 2016May 2016June 2016July 2016August 2016September 2016October 2016November 2016December 2016January 2017February 2017March 2017April 2017May 2017June 2017July 2017August 2017September 2017October 2017November 2017December 2017January 2018February 2018March 2018April 2018May 2018June 2018July 2018August 2018September 2018October 2018November 2018December 2018January 2019February 2019March 2019April 2019May 2019June 2019July 2019August 2019September 2019October 2019November 2019December 2019January 2020February 2020March 2020April 2020May 2020June 2020July 2020August 2020September 2020October 2020
News Every Day |

The S&P 500 is staring down a key technical level that could determine whether the market's worst selling is over, Fundstrat's Tom Lee says

Tom Lee
  • The S&P 500 is flirting with a "line in the sand" that will determine if the worst of the September market correction is behind us, Tom Lee said in a note on Wednesday.
  • That "line in the sand" is 3,363.31 on the S&P 500, which represents the 38% Fibonacci retracement level of the June 29 low and the September 2 high.
  • On Wednesday, the S&P 500 closed just below the 3,363.31 level, and traded slightly above that key resistance level in Thursday trades.
  • Visit Business Insider's homepage for more stories.

The S&P 500's 11% peak-to-trough sell-off in September has tested bullish investors, as a resurgence in daily COVID-19 cases and uncertainty surrounding additional stimulus and the November election serves as an overhang for the stock market.

But according to a Wednesday note from Fundstrat's Tom Lee, investors can rest easy if the S&P 500 manages to close above this "line in the sand" — 3,363.31, or the 38% Fibonacci retracement level of the June 29 low and the September 2 high.

If the market is able to decisively close above that level, investors would have "a greater sense the worst is indeed behind us," Lee said.

Read more: US Investing Championship hopeful Evan Buenger raked in a 131.9% return through August. He shares the distinct spin he's putting on a classic trading strategy that's led to his outsize returns.

In technical analysis, the Fibonacci retracement tool is used by traders to help identify potential levels of support and resistance that the market might encounter during a sell-off or rally. The tool is based off of the Fibonacci "golden ratio" and focuses in on the 61.8%, 50%, 38.2%, and 23.6% levels of a market move.

The S&P 500 managed to find support in September at the 61.8% retracement level of the late June to early September rally. Put another way, September's 11% sell-off in the S&P 500 retraced 62% of its summer rally.

fundstrat fib.JPG

Read more: A portfolio manager who's outperforming nearly all of her peers this year shares 4 high-conviction stocks driving her strong performance across 2 funds

Throughout this week, the S&P 500 has struggled at the 38% retracement level of 3,363.31, and on Wednesday closed at 3,363.00, just a third of a point below the key technical level.

In Thursday afternoon trades, the S&P 500 traded 15 points above the key level, signalling that a close above the level may be imminent.

From there, the next level of resistance traders will have their eyes on is the record high of 3,588 reached on September 2, which represents potential upside of 6% from current levels.

What could drive the market higher from here? According to Lee, "over the next 30 days, we could see therapeutic/vaccine news." Additionally, Lee pointed to the high level of cash on the sidelines ($4.3 trillion) and negative AAII retail investor sentiment, which signals that the pain trade is likely higher, not lower from here.

Read more: Sustainable-stock funds are snapping up shares of these 20 companies — and most of them beat the market during September's turmoil, RBC says

Read the original article on Business Insider

Read also

This Morning viewers in hysterics as Eamonn Holmes compliments vet’s ‘nice pussy’

Two men charged after van filled with explosives is discovered in Philadelphia

Ballot selfie laws: Is it legal to snap a photo in New York?

News, articles, comments, with a minute-by-minute update, now on — latest news 24/7. You can add your news instantly now — here