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Vanguard S&P 500 ETF price analysis: A correction or end of the rally?

By:
on Jan 27, 2021
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  • Vanguard has weakened more than 2.4% this Wednesday
  • As long the price is above $300, there is no indication of the trend reversal
  • The U.S. Federal Reserve decided to keep overnight interest rate near zero

Vanguard S&P 500 ETF has suffered its biggest one-day percentage drop in the last three months this Wednesday. Vanguard S&P 500 is pressured by a slump of Boeing shares, but concerns around COVID-19 and the disappointingly slow rollout of the vaccine also negatively influence this ETF.

Fundamental analysis: The U.S. Federal Reserve decided to keep overnight interest rate near zero

Vanguard tracks the S&P 500 and gives you exposure to 500 of the most significant public companies in the United States. Vanguard S&P 500 ETF has collapsed this Wednesday as risk aversion continues to dominate financial markets.

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The U.S. Federal Reserve had its monetary policy meeting today and decided to keep overnight interest rate near zero and made no change to its monthly bond purchases. This was widely expected, but the U.S. central bank once again announced that will support the economy for as long as needed.

“Given the continued concerns around COVID and disappointingly slow rollout of the vaccine, the U.S. economy is likely to lose momentum in the first quarter of the year. Yet with fiscal stimulus having taken over from monetary policy as the only game in town, it was always doubtful the Fed would announce any new actions this month,” said Seema Shah, chief strategist at Principal Global Investors in London.

Despite this, Vanguard 500 ETF continues to trade in a bull market, and there will certainly be lots of opportunities for short-term traders in the upcoming days. Vanguard S&P 500 ETF is correlated with the S&P 500, and it is important to say that the S&P 500 also has its biggest daily percentage decline since Oct. 28.

Technical analysis: Vanguard has weakened more than 2.4% this Wednesday

The U.S. stock market has entered the correction phase, but for now, this Vanguard S&P 500 ETF remains in the “buy” zone, and there is no indication of the trend reversal. Vanguard has weakened more than 2.4% this Wednesday and closed at $344.

Data source: tradingview.com

Most fund managers do not expect a sharp pullback in 2021, but the current risk/reward ratio is not good for long-term investors, in my opinion. Some financial analysts even say that we will continue to see a push higher for Vanguard S&P 500 ETF as the FED announced that it would support the economy for as long as needed.

On this chart, I marked important resistance and support levels. The important support levels are $320 and $300, $360 and $380 represent the resistance levels.

If the price jumps above $360, it would be a signal to trade Vanguard 500, and we have the open way to $370. On the other side, if the price falls below $300, it would be a strong “sell” signal and a sign of positive trend reversal.

Summary

Vanguard S&P 500 ETF has suffered its biggest one-day percentage drop in the last three months this Wednesday. Vanguard has weakened more than 2.4%, but for now, this ETF remains in the “buy” zone, and there is no indication of the trend reversal. If the price jumps above $360, it would be a signal to trade Vanguard 500, but if the price falls below $300, it would be a strong “sell” signal.