This article was written exclusively for Investing.com
Undoubtedly, the biggest concern among market participants right now is the alarming spread of the coronavirus in the US, which shows no sign of easing as cases continue to fall worldwide also rise. On Thursday, a record 37,000 new cases were registered in the US, breaking the previous peak in April. There is a risk that we could see even more cases today and over the weekend, which could mean more states can reverse plans for reopening. The end result would be more economic pain, which would further reduce the chances of a quick recovery.
Given the above risk, doubts remain as to whether US equity markets will be able to increase their gains on Thursday as a late-day rally saved the day and saw indices close in positive territory. Index futures fell in the early hours of Friday before recovering slightly at the time of writing – reflecting the price action we've seen all week.
Overall, concerns about the virus outbreak in the US have so far been offset by continued support from central banks. However, now that the markets are sharply off their March lows, it makes sense to think that the impact of stimulus has probably been priced in by now. Thus, if we see a further sharp increase in virus cases, this could disrupt this balance and possibly correct the indices.
From a technical point of view, the chart above has been struggling with the other major global indices since the beginning of the second week of June. The index hit resistance around the 3210/15 area, previously a support level before the lockdown, and we saw strong sell-offs there, before the index rebounded a few days later when it found support around the 200-day moving average. Price action has been very choppy since then.
So far, despite the recent struggles, the bullish trend looks intact, as the index keeps itself above the 200-day average and an upward trendline.
However, it is worth keeping a close eye on the S&P, as a clean break below Thursday's low of 3005 would likely kick off a short trend on bears. If that happens, we may see a sharp decline in the coming days as weaker hands on the long side are forced to liquidate. Conversely, if the index manages to remove resistance in the shaded area on the map around 3080-3130, where we also see a short-term bear trend converge, this could pave the way for new tech purchases in the coming week .
