I am looking at an SPX support level of 2,000 (tolerance down to 1,990) as a line in the sand. This level was an important threshold to cross in March and it represents the 38.2% Fibonacci retracement from the February 11 low to the April 20 high. Bull markets frequently perform a 38.20% retracement before moving higher.
If the S&P 500 breaks that support with conviction then 1,960 is the next support level and represents a 50% retracement , which is the last reliable bull market Fibonacci support. A trip below 1,960 this year is not my expectation and the ultimate end is unknown.
Oil has been staying above $40 lately ($44.05 now), which is bullish for the energy sector in the S&P 500. As was mentioned in my last post, the US equity markets are probably being helped by foreign money trying to find a home away from the low or even negative interest rates in some countries.
Today’s ADP employment report caught economists by surprise at only 156,000 where 194,000 was expected and the prior month was 200,000. Yesterday’s Caixin PMI number came in at 49.4, showing further contraction in the Chinese economy despite strong government stimulus. China is an export driven economy so when the developed countries of the world buy less then they feel it in China.
The market is concerned that these two reports are early signs of an approaching recession. Despite all that we do know about the economies of the world, we still have trouble knowing what is going on now so these reports may mean nothing.