The S&P 500 is rebounding miraculously off its 100-day-moving-average in the face of a global panic about President Trump’s tariff proposals.
But Goldman Sachs’ technical analysis team are worried and target a drop to 2,449 for the major US stock index.
The S&P started a corrective process at the late January highs
The index saw an initial selloff that was impulsive in nature (wave A). This tends to mean that there’s likely going to be another impulsive 5-wave decline to complete an ABC 5-3-5 count. From current levels, an eventual C wave could reach somewhere close to 2,449.
Having said that, it’s not uncommon for wave B to form complex structures (often triangles). Although ultimately bearish, there’s scope for some initial consolidation/ range-bound price action while still in the “body” of the February range.
The next significant retrace level below is 61.8% from Feb. 9th at 2,631. The 200-dma will likely be critical at 2,560. This particular moving average held very well at the prior low. Getting a break below it would therefore help to confirm that this is in fact wave C targeting at least ~2,449.
View: Could see overlapping price action in between 2,600 and 2,800. A break below the 200-dma will open up a minimum target down at 2,449.
The S&P has an eventual target at 2,449…
An ABC equality from the January high projects down toward ~2,449
Reaching this 2,449 level would also mean retracing ~38.2% of the immediate advance from Feb. ‘16 (2,467). This would therefore be an ideal target from a classic wave count perspective; that is, if correcting the rally from Feb. ‘16.
As has been discussed in previous updates, the market could also be starting a much bigger/more structurally corrective process, counter to a V wave sequence from the ‘09 lows. If that’s the case, there should be room to continue a lot further over time. At least 23.6% of the rally since ‘09 which is down at 2,352.
Bottom line, it’s worth considering the possibility of continuing further than 2,467-2,449. Doing so might imply that this is not an ABC but rather a 1-2-3 of 5 waves down, in a larger degree ABC count that could take months to fully manifest. While it is still far too early to make this call, the important thing to note is that the 2,467-2,449 area will likely be trend-defining.
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