Why the market's drop may just be getting started



The S&P 500 has suffered a brutal beginning to the year, falling 8 percent in its first 11 sessions. And Oppenheimer technical analyst Ari Wald sees no reason for the selling to conclude just yet.

Wald reduced his first-quarter target for the S&P 500 from 1,900 to 1,740, which implies a further 7 percent drop from Tuesday's closing price.

The first impetus for his call is historical. Wald finds that in similar, non-recessionary downturns, the S&P 500 has tended to drop 20 percent over an eight-month period.

Beyond that, oil's dramatic downside move "and coinciding resumption of weakness in the energy sector should pull the S&P to 1,740," Wald wrote in a Tuesday email to CNBC. "We continue to recommend selling energy."

Finally, a target of 1,740 would represent a 38.2 percent retracement of the S&P's epic bull run from 2011 to mid-2015.

Random as it might sound, 38.2 percent is an important number in technical analysis. A so-called Fibonacci retracement figure, 38.2 percent is generated from the famous Fibonacci sequence of numbers (1, 1, 2, 3, 5, 8, 13…). Specifically, dividing a number in the sequence by the number two numbers after it will yield 38.2 percent, as long as one is looking sufficiently deep in the sequence.

Using that extremely specific number to forecast an index price might sound like voodoo, but it is not; it is technical analysis.


 Varchev Traders
If you think, we can improve that section,
please comment. Your oppinion is imortant for us.
WARNING: Any news, opinions, research, data or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. Varchev Finance Ltd. expressly disclaims any liability for any lost principal or profits which may arise directly or indirectly from the use of or reliance on such information. Varchev Finance Ltd. may provide information, quotes, references and links to or from other sites and blogs and other sources of economic and market information as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the sites, blogs or other sources of information.
Varchev Finance


25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256

Universal numbers

World Financial Markets - 0700 17 600    Varchev Exchange - 0700 115 44

Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.

Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006

The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.


CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

chat with dealer
chat with dealer
Cookies policy