S&P 500 Pulls Back As Traders Worry That China’s COVID Curbs May Hurt Global Growth

Key Insights

• Rising coronavirus cases in China and the pullback in commodity markets put pressure on S&P 500.
• Tesla stock tested yearly lows as traders bet that demand for the company’s cars in China would decline.
• S&P 500 needs to settle back above the 3960 level to have a chance to gain sustainable upside momentum. 

S&P 500 Is Losing Ground At The Start Of The Week

S&P 500 pulled back towards the 3940 level as traders feared that rising coronavirus cases in China would hurt global growth and create additional supply chain problems. The tech-heavy NASDAQ Composite was down by more than 1% amid a strong sell-off in the tech segment.

Today’s pullback was led by energy stocks, which have found themselves under strong pressure after a WSJ report indicated that Saudi Arabia and other OPEC+ members may discuss a production increase of 500,000 bpd.

This report has been officially denied by Saudi Arabia, and WTI oil rebounded towards the $80 level after touching lows near $75.50. However, energy stocks remained under pressure. Diamondback Energy, Halliburton, Marathon Oil were down by 3% – 5% in today’s trading session.

Leading tech stocks have also moved lower today. Tesla, which is sensitive to news from China, was down by 6% and tested yearly lows below the $170 level.

Disney opened near the $100 level after Bob Iger retured as CEO. The stock declined towards the $97 level due to profit-taking after the strong move.

From a big picture point of view, S&P 500 needs additional positive catalysts to continue the rebound. It remains to be seen whether traders will find such catalysts ahead of Thanksgiving, as this period is characterized by slower trading activity.

S&P 500 Remains Stuck Below The 3960 Level

S&P 500 has settled below the 3960 level. The nearest support for S&P 500 is located at 3920. If S&P 500 gets below 3920, it will move towards the next support level at the 20 EMA near the 3885 level. A move below the 20 EMA will push S&P 500 towards the support at 3865.

On the upside, a move above the 3960 level will open the way to the test of the resistance at 4000. In case S&P 500 manages to climb above this level, it will head towards the resistance at 4015. A successful test of the resistance at 4015 will open the way to the test of the next resistance level, which is located at 4040.

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