It took just 6 days to wipe out nearly 100 points on the S&P 500 (SPX – Quote). With all eyes looking forward to a “Santa” rally, many were caught off guard. For the record, the Santa rally typically doesn’t start until next week, so we may still get one… albeit from lower levels.
Here’s one of my tweet’s from last Thursday that summed up the action heading into Friday:
Bears looking for a weekend flush, bulls playing defense & waiting for Santa.
— Andrew Nyquist (@andrewnyquist) December 11, 2014
And the bears clearly one that battle, with a flush on Friday into Monday. So is the damage done for now? Can we expect a respite from the selling? Well if the bull have hopes of turning this around, they’ll need to make a stand soon. On Friday, I tweeted out a chart of the near-term S&P 500 technical support levels:
The S&P 500 followed through to the downside on Monday, taking out the 50 day moving average like a hot knife through butter. It’s worth noting, though, that the 50 day moving average is typically more of a reference point than a true support (in my opinion). And the .382 Fibonacci retracement has held for now (it nearly marked the low of Monday’s session). Will this hold for any longer than a trade? If not, the next S&P 500 support levels come in around 1947 (200 day moving average), 1920ish (.618 Fib retrace), and 1900 (the April/May highs and August retest). Note that the RSI is currently 34.
In full disclosure, I put on a long trading position in SPDR S&P 500 ETF (SPY – Quote) into the .382 Fibonacci support level (with a stop), looking for a bounce. Below is an updated chart with near-term supports.
S&P 500 Daily Chart
Follow Andrew on Twitter: @andrewnyquist
Author carries long trading exposure to S&P 500 related 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.