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The S&P 500 established a new record high of 3,588 prior to closing last week at 3426. For the week, it ended up with a loss of 2.3%.

During Friday’s wild sell-off, tech stocks, which have shown the biggest gains since March, were tanking.

This caused its longest weekly winning streak since last December to be finally broken.

Outside the U.S., traders can trade contracts for difference (CFD) on the S&P 500, along with other major global indices. They’re called “stock index CFDs”.

With August coming to an end, the S&P 500 finished higher for five consecutive months, the longest monthly win streak since six in a row in 2018.

It remains up 6.1% for the year.

The S&P 500, or simply “the S&P”, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most followed equity indices and helps you answer the question “How is the U.S. stock market doing?”

S&P 500 - Sep 7, 2020

Fundamental Picture

Last Friday, the U.S. jobs report for the month of August was released and showed that the U.S. unemployment rate fell to 8.4% last month from 10.2% in July.

The U.S. economy added 1.371 million jobs during the month, beating expectations of 1.32 million.

Even with the better-than-expected news, it seemed to be mostly ignored by the market on Friday.

The jobs report was overshadowed by the falling prices of tech stocks and the news of Softbank being identified as the mystery “whale” behind the recent stock market rally by making big shadowy bets on tech stocks.

This week, I expect the market to shift focus from tech stocks drama back to economic fundamentals.

Regarding the coronavirus, the world has surpassed 27 million confirmed cases and over 889,000 deaths.

In the U.S, there are now 6.3 million cases and almost 189,000 deaths. 

Over the past week, there has been an average of 40,525 cases per day, a decrease of 4 percent from the average two weeks earlier.

COVID-18 Cases - 09/07/2020

While case numbers remain high, reports of new cases have dropped considerably since late July, when the country averaged over 60,000 per day.

Deaths remain well below their peak spring levels.

COVID-19 Deaths - 09/07/2020

As cases and deaths fall, this is a bullish development.

Further reduction in COVID-19 case growth could further boost the U.S. economy in the remaining months of 2020.

Because of the declining coronavirus growth rate in the U.S., I remain cautiously optimistic about the U.S. economy’s reopening progress.

Technical Picture

There is an ascending channel starting from March.

The bottom of the channel is now being tested. 

S&P 500 - Sep 7, 2020

Aside from the bottom of the channel, the 20 SMA (yellow line) was also acting as a support area.

Both held as support on Thursday, but on Friday, the price did manage to close below both.

But barely.

If we look at Friday’s candlestick, it formed a hammer after Thursday’s plunge.

From a price action perspective, this is bullish.

Given that the 3400 handle wasn’t broken, I think the recent decline was merely a pullback and look for a bounce and the uptrend to continue.

I see this as a “buy the dip” (BTFD) opportunity and I’m going to go long.

That said, the risk of a strong breakdown (downside breakout) below the channel and the 3400 handle this week would be very bearish. Until this happens though, I stay with the current trend, which is still up.

In a strong bull market, which is what the S&P is currently in, dips are gifts. 😊

Trade Idea

Here’s my trade idea:

Long S&P 500 at 3427.

My stop loss (SL) will be 3350.

My profit target (PT) will be 3600.

If you’re outside the U.S., you can use an S&P 500 CFD, which will mirror the price of the S&P 500 Index.

If you’re inside the U.S, you can buy an index-based ETF like SPY or trade futures like the Micro E-mini S&P 500 futures (MES).

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This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.