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Chart of the day: US stock futures signal lower open after worst week since GFC

The S&P 500 (US500) index closed below December 2018 support on Friday and looks set to open lower as futures fall 5%, hitting limit down ahead of the New York session.

US500 chart
"The US500 closes below Dec 2018 support at the 2338.6 level. The next strong support level is the 2000 handle, which held the index between 2014 and 2016."

US stocks closed Friday almost 15% lower on the week, the worst week since the 2008 GFC. Since Friday’s close, more lockdowns have been announced across the world, including in Australia, Germany, and several US states.

Price action had respected December 2018 support at 2338.6 for most of last week until virus fears ramped up again Friday as New York state went into mandatory lockdown. The US500 closed 4.3% lower Friday at 2304.9.

The benchmark index is trading at levels not seen since 2017. There is little support until the 2000 handle, a key level that supported the index between 2014 and 2016.

SP500 chart

Markets have priced in a US and global recession as hopes for a V-shaped recovery fade and an L-shaped recovery looks more realistic. Stock markets will likely remain volatile until the virus is contained, and considering the effect hasn’t yet peaked, a sell-off towards the 2000 level isn’t unreasonable.

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