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Published On: Wed, Aug 13th, 2014

Downside potential seen for the S&P 500

The US benchmark S&P is entering a sell zone as further downside for global equities is expected.

The US benchmark S&P is entering a sell zone as further downside for global equities is expected.

In this material we will stop short of listing and explaining the fundamental factors behind the possibility of further selloffs in equities, on both the US and on global markets. This entry is completely based on technicals.

After the impulsive decline of the S&P 500 from 1991, which stopped at 1895 last Friday, recovery is in progress. The index is currently trading at $1941.50; the RSI (14) on the 1-hour frame is now at 65.50, approaching the 70 zone. The indicator is not in an overbought territory yet, but it will rise further until the benchmark moves up some $8-10.

Selling the S&P 500 in the $1948-1952 zone could potentially result in a 3-5 percent profit. The position allows for a tight stop, which needs to be above $1965, as the level is above some key resistances: the 50-day Moving Average is now at 1956.81; the 61.8% Fibonacci retracement of the fall from $1991 to $1895 is at 1955; and the $1952-$1954 zone was a critical support which, after the impulsive selloff from $1991, turned into an important resistance.

Take profits in this scenario need to be placed in steps at $1900 and $1870.

This article expresses the own opinion of Profitease.com, which is based on chart observations. It should not be taken as advice on buying or selling any financial instrument! Profitease.com does not accept any liability for losses or other damages endured as a result of using this article for trading purposes!

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ProfitEase.com

- ProfitEase.com is a global financial portal that provides news, analysis, economic calendars, streaming quotes, technical studies and other resources about the global markets. The materials on the website cover a variety of fields including: economics and politics; monetary policy; forex, CFD and derivatives trading; commodity markets; bond markets.

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