Bassanese Bites: Testing support – November 02 2020

Global markets

A litany of negative factors conspired to push equities lower last week, with the U.S. S&P 500 down a chunky 5.6%. Rising COVID cases in Europe and the United States, new lockdowns in Europe, confirmation of no pre-election U.S. stimulus deal, Presidential election jitters (especially the risk of a contested result), and concerns over tech valuations were all contributing factors. It’s little wonder the market buckled! Nervousness is apparent given the fact the NASDAQ-100 dropped 5.5% last week even though all of the FAANG stocks beat earnings estimates.

U.S. equities are now at an interesting technical position, with talk of a potential ‘double top’ reversal. As seen in the chart below, the S&P 500 reached similar peaks of just over 3,500 on September 2 and October 12 and is now back testing its late September low at just over 3,200. The 200-day moving average is lurking a little lower at around 3,100.

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