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SPY: It's Looking For The New Bottom

Mar. 09, 2020 2:12 PM ETSPDR® S&P 500 ETF Trust (SPY) ETF24 Comments


  • The SPY is smart about the novel coronavirus, COVID-19.
  • However, its first attempt at discounting the economic impact just failed.
  • When the news becomes worse than expected, the SPY drops to a lower bottom.
  • Sunday,  overnight futures dropped to 2,818 and the SPY is looking for a new bottom below $286.
  • The next support level is at $277 and near the 50% retracement of the last move up to the last high. However, there are no supports in a falling market until price stops falling.
  • Looking for a helping hand in the market? Members of Daily Index Beaters get exclusive ideas and guidance to navigate any climate. Get started today »


On Sunday night, the overnight futures stopped trading at $2,018 after dropping to the 5% limit. Now, the SPY (NYSEARCA:SPY) is looking for a new bottom below the first bottom of $286. The next support level is $277, but unfortunately, there are no support levels on the way down until price stops falling to identify where the buyers come in for the bargains.

The market is an efficient pricing mechanism and successfully matches supply and demand to determine price. That does not mean the price is efficient, especially in the short term. Rumors, fear, panic, greed and other factors can seriously distort price in the short term. However, in the long term, when the fundamentals become fully known and understood, the market price becomes efficient based on fundamental valuation. Value players and traders love inefficient market pricing and move in at the bottom, when blood is flowing, so to speak, in Wall Street. The current panic selling is creating a new opportunity for the bargain hunters and bottom fishers. They are usually too early in buying. Traders and robots don’t want to be too early and will wait for the signals to turn up before they buy.

SPY’s First Bottom Was Wrong

The SPY discounted the novel coronavirus impact at 15.8% by dropping from $339.1 to $285.5. You can see this in the daily SPY chart:

Daily SPY 3720

As you can see, the bargain hunters bounced it back up to $313.8, but after they were done, the SPY headed back down, reaching for $285.5. It did not make it, but found some buyers before the close on Friday and moved from a low of $290.2 to close higher at $297.5. However, on Sunday night, market futures dropped to 2,819 which means the SPY will be looking for a new bottom on Monday.

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This article was written by

Tom Lloyd profile picture

Tom Lloyd holds an MBA in Accounting from St. John's University, where he also taught courses on stock market mechanics. Prior to his time as an educator, Tom served as a Wall Street professional, marketing fundamental, quant, and technical research to professional portfolio managers. He is also the author of the book "Successful Stock Signals for Traders and Portfolio Managers.”

Tom leads the investing group Daily Index Beaters where he strives to help his group beat the indexes by sharing a range of reports focused on what smart money and insiders are trading. His Stocks In Demand signal combines both fundamental and technical analysis to help inform both short-term trade and long-term investment ideas. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in SPY over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (24)

SameAsItEverWas profile picture
So we are getting a payroll tax cut, just like were getting a China deal, a wall, a lower deficit, and a pony for everyone? PS. You can not cut payroll taxes all you want. Hourly wage workers without sick leave will still go to work, serve you food, clean your hose, ect because they have no other choice, and everyone’s grandparents will get sick.
Time to raise some cash on the bounce if you haven’t already done so.
This slow moving Freight train is coming and depending on your comfort level, 25%-50% cash so you sleep well at night.
This is still in 2nd to 3rd inning of the ball game.
In 2008-2009, JPC dropped to ~$3.5 and now it is at $9.28.
Let technical charts guide you.
Good luck and Take care
2 much QE profile picture
It’s all about Wall Street ever since the president stupidly took ownership in it. Told Pence to control Main Street which is a joke to date while PT Barnum finds time to crookedly talk to his billionaire cronies to save this market before election time. What a crock!!
droknows profile picture
wall street just dying for more corporate taxpayer funded bailouts. biggest hypocrites on planet earth.
pat45 profile picture
Trump should say hourly workers with no paid sick time can apply for workers compensation if they get corona and need weeks off he will also need to start FREE corona testing if USA gets a lot cases and also FREE vaccines when available if needed. This is not democratic...just needed and when done in huge volume healthcare is not expensive. Stop being controlled by the insurance and health companies and lawyers
Buyandhold 2012 profile picture
SPY is looking for the new bottom?

So am I.

That's the job of all investors.

Keep your eyes peeled for the next good firm bottom.
You sometime say you never sell. Other times you are this patient investor who looks for a bottom, implying you also have a significant chunk of cash?
Buyandhold 2012 profile picture


I never sell.

And I always have some cash or dry powder.
Think Long Term profile picture
Credit stress, energy bonds about to implode, Douche Bank about to implode sitting on $43 trillion of worthless derivatives, forex markets saying collapse imminent, coronavirus shutting down entire cities and countries. The bottom is no where in sight. This fake FED PUMPED market is doomed. Rate cuts and QE can no longer save this fiasco they created.
the drop is not even a big deal. dont worry about it. were still all time high from 2018-2019
New study showing how easily this virus spreads...forget what the CDC is telling us!!!....this explains the rapid spread in China, Iran, Italy, and rest of the word...it was a little mysterious why entire families in a house or airplane or bus or subway were all infected so quickly....this is bad...

This study also explains why the Chinese were spraying all of their cities furiously...nobody had an explanation...THEY KNEW....a month ago....
before I read this study I figured SPY 240 - 250 soon...NOW??? ...220

airplanes will be veritable petri dishes..flying will come to a virtual stop for 2 months ..forget cruise ships....all ships will be in port within 2 weeks..don't even mention subways and sports stadiums...
Diesel profile picture
We closed at $273 which is 5 points below $278 we hit exactly a year ago so now stocks are down YoY. Also more than half of Trump's market gains have been erased already.
people in cash needed to have moved to bond funds, VUSUX is up almost 30% YTD after today!
krempep profile picture
The damn thing just won't go down. I am hoping for at least 275 but thats just a start. I need at least a 250 strike price to get serious.
its at 273 right now
WAM002 profile picture
You may get your wish soon. Not that I know anything. I’ve been in cash for weeks now. For me it is a game of patience.

“I thought about how mothers feed their babies with tiny little spoons and forks so I wondered, what do Chinese mothers use? Toothpicks?” -
George Carlin
Queen Anne Investor profile picture
We are a long way from the bottom. Investors should not be tempted by the recent drop. Stocks prices were artificially inflated by the Fed (through easy money policies) and governments (through excessive spending without appropriate taxation). We need to see a lot of bankruptcies and a lot more suffering to clear the cobwebs in the economy. A trillion dollar deficit in an economic boom with record low unemployment is unprecedented. Be patient. seekingalpha.com/...
Sammy325 profile picture
I agree, we need to see more bleeding.
minimum SPY 200
Fed isn't done yet, will keep trying to pump prices even it means causing a depression some years later
MacAfrican profile picture

Sure, negative treasury rates make a lot of sense.

News flash : the pump, she is empty
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