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S&P 500: Why This 'Pullback' Will Likely Continue


  • The S&P 500/SPX just had a pullback of 7%. However, the selling is probably not over just yet.
  • The Nasdaq corrected by around 5.5%, but if a crucial technical level is breached, the correction could be around 12%-13%.
  • The VIX illustrates that many market participants became extremely complacent and were caught off guard by the violent selloff.
  • Other assets to consider while stocks take a breather.
  • This idea was discussed in more depth with members of my private investing community, Albright Investment Group . Get started today »

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The S&P 500/SPX (SP500) had corrected by 7% before catching a substantial bid in the overnight session. Yesterday's panic-driven selling pushed prices to critical resistance levels in various sectors.

S&P Futures

Source: Think or Swim

SPX and stocks in general are at a major inflection point here. The SPX corrected nicely, right down to the 3K support level. Yesterday's extreme selling may have been an overreaction to recent news and may represent a short- to intermediate-term buying opportunity in certain sectors.

We are watching the 3,000 - 2,990 for support now, and looking at 3,100 as initial resistance. If SPX breaks out above 3,100 it could possibly fill the gap up to 3,200 quite quickly. Only once this happens, will we see whether this rally can be sustained.

Let Us Look at The Nasdaq

Nasdaq The Nasdaq had a 5%-6% correction from peak to trough, but it may not be over yet. I would remain cautious around these levels as it's not yet clear if the market has bottomed.

NasdaqNasdaq rebounded nicely from 9,600 support. However, if the Nasdaq rolls over and 9,600 gets breached, I expect a pullback to the 9,000 level is very possible. This would be an additional 6.25% decline, bringing total peak to trough declines to roughly 12%-13% in the Nasdaq composite. Incidentally, this is roughly in line with SPX's potential drop to the 2,850 point if the current pullback continues.

So, Why the Selling?

The DJIA gave up a remarkable 1,800 points, while the VIX skyrocketed by 52%. Is this the time to panic?

I think not, as much of the panic already occurred yesterday. This was likely a technical-driven selloff due to markets appreciating extremely rapidly. An important factor to consider is that the Fed remains committed to injecting massive capital into markets. This capital that's

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This article was written by

Victor Dergunov profile picture
The #1 Service For Diversified Portfolio Profits

Hi, I'm Victor! It all goes back to looking at stock quotes in the old Wall St. Journal when I was a kid. What do these numbers mean, I thought? Fortunately, my uncle was a successful commodities trader on the NYMEX, and I got him to teach me how to invest. I bought my first actual stock in a company when I was 20, and the rest, as they say, is history. Over the years, some of my top investments include Apple, Tesla, Amazon, Netflix, Facebook, Google, Microsoft, Nike, JPMorgan, Bitcoin, and others.

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