The S&P 500 Just Flashed Its Scariest ‘Crash’ Signal Yet

The U.S. stock market struggled for momentum Tuesday after failing to build off a strong start to the week, as geopolitical tensions and a giant “bait-and-switch” from Moderna kept investors on edge.

For the S&P 500 Index, the sudden pullback has exposed a bearish triple-top formation that foretells of an ominous drop in the not-too-distant future.

The S&P 500 Index declined by as much as 0.5% Tuesday morning, reaching an intraday low of 2,937.75. The benchmark has now tried and failed to break above the 2,950 resistance for the third time.

In technical speak, that’s a triple-top formation, which suggests the next move will probably be a retest of support. That level is below 2,800, based on ZeroHedge’s analysis of S&P 500 e-mini futures.

A triple-top often precedes a large correction or even a crash as the bulls lack the conviction to keep prices moving higher.

The large-cap index hasn’t traded above 3,000 since early March when it was in a protracted downtrend. Stocks would eventually reach the bottom on Mar. 23 before rebounding more than 30%.

Equity markets have been surprisingly resilient to dismal corporate earnings–so much so that the S&P 500 has discounted what’s likely to be the worst earnings season since 2009.

Blended Q1 earnings are down 13.8% year-over-year, based on 90% of S&P 500 companies to have reported so far.

Despite the downbeat earnings guidance, not all companies have been impacted negatively by coronavirus-related lockdown orders. Analysts at Ned Davis Research say the majority of S&P 500 companies are virus “winners,” which means they may have benefitted from the pandemic.

Walmart is one of the most prominent examples. The retail giant reported Tuesday that revenues from stores and digital channels surged in the first quarter.

Comparable sales in the U.S. climbed 10% year-over-year, while e-commerce revenues spiked 74%.

The S&P 500 Just Flashed Its Scariest ‘Crash’ Signal Yet, CCN, May 19