SP500: Extreme Volatility Continues

The SP500 index surged around 2 per cent on Thursday, only to lose all gains in the next 10 minutes after the market closed, as both Amazon and Google reported negative earnings and downgraded the outlook. This sent their stocks down by 7-8 per cent during the initial reaction. Therefore, the whole market plummeted after a few hours and the SP500 futures are now down 0.6 per cent on Friday, trading at the current swing lows of 2,665 USD.

The index is now dangerously close to the bullish trend line from February and April lows, which stands near 2,650 USD. From a long-term perspective, if the price remains above, the long-term outlook still seems bullish. However, breaking below would cancel this view and a bigger correction could occur.

The resistances could be at yesterday's highs near 2,723 USD and then move to around 2,740 USD, where the short-term bearish trend line is located. There is a bigger bullish divergence on the two-hour chart between the price and the RSI indicator, which could help the price rise from current levels.

However, sentiment for stocks appears negative and it looks like traders may switch their current trading strategy, which could be a sign that a bearish sentiment is about to begin. If the support at 2,650 USD cracks, we could see a quick drop to April lows at 2,560 USD.

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