The S&P 500 plunged 12% on Monday, it’s worst one-day decline since the crash of October 19, 1987. From its all-time high on February 19, the index is down 29.5% in just 18 days, also the worst decline since 1987. The index closed at 2,386 and is rapidly approaching key chart support near 2,350 from the lows in December 2018. Interestingly, that area also represents a key Fibonacci retracement of 38.2% of the entire bull market since 2009.
Using an arithmetic scale on a longer-term chart going back to 2009, the “500” is also very close to trendline support off the lows since 2009 and 2011. We always use a logarithmic scale for longer-term charts, but not everyone else does. If the December 2018 lows are taken out, there is major chart support in the 2,140/2,200 region from the top of the bullish consolidation in 2015/2016. Maybe we hit a panic low on Monday, but we really don’t know yet. The market has a long way to go to dig itself out of this mess.
We are back below the 200-week moving average, as well as what we consider to be the bull market trendline. Both of these longer-term supports are near 2,650. The risk/reward seems very favorable based on market sentiment and market breadth — but as we have said, we need some bullish price confirmation to suggest a bottom is here.
The 14-week Relative Strength Index (RSI) is extremely oversold with a reading of 23. This is the most oversold the “500” has been since October 2008 during the financial crisis. The Nasdaq is testing its 200-week average for the first time since 2010. The index dove 12.3% Monday, its worst decline ever.
Zoom Video Communications (ZM)
Zoom Video is a video-first cloud-native scalable communications system for enterprises designed to facilitate video, voice, chat, and content sharing across devices and locations through its Zoom Meetings and Zoom Phone applications. Zoom derives 20% of revenue outside the U.S.
We are revisiting ZM, which was highlighted 2/11 at $89.67 and 2/25 at $105. ZM broke out of a complex bottom on February 3 on huge trading volume. The stock then traced out a bullish pennant on decreasing volume, a bullish sign. The shares broke out again on 2/18, rising the next two days on heavy volume and peaking on an intraday basis at $130 on March 5. Since then, it appears the stock is tracing out a bull flag. According to Investors.com, ZM has very high Composite, Relative Strength (RS), Group RS, and Accumulation ratings, and a high EPS rating.
We would put a stop-loss just below chart support at $95. We would take profits in the $130 region.
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