The S&P 500 Index $SPX is battling its 50 Day moving average (DMA) around 2040, seeing a major tug-o-war play out between the bulls and bears. Investors should also take note of the April low of 2033.
In all, this makes the 2035 area an important one for the stock market.
For the continuation of the strong uptrend off the February lows, the S&P 500 needs to find support in the 2035 area or I believe we’ll see a deeper pullback for stocks.
Let’s step back for a minute. Looking at the chart below we can see the move off the October 2015 low failed to take out the closing high of July 2015 and and this resulted in a lower low for stocks. Looking at 2016, the move off the February low may suffer the same fate, as the closing high of April failed to take out the closing high of November. So at this point we are looking at two failed breakout attempts and lower lows for the stock market.
Areas of support to watch include the 2035 area, followed by the psychological level of 2000. This level lines up pretty well with a 38.2% Fibonacci retracement of the recent uptrend. Should that level be taken out, the next level of any relevant support that I see is the 1965 level. So at this point, the tone is somewhat neutral with a small bias to the upside as that is what the trend has been since February and there hasn’t been any significant damage to that trend at this point.
S&P 500 Index Chart – A Technical View
Thanks for reading and have a great week.
The author has a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.