The S&P 500 (first chart below) found support seven times in the 1490-1500 zone before breaking down a week ago, so it’s not surprising that that level stopped the rally today, as the “get me out, I’m back to even” impulse is strong at such levels. A sharp pullback is common after 90% upside days like we had yesterday, but the benefit of the doubt goes to the bulls for now. Resistance starts at 1492.53 and runs to 1500 (with the 200-day average at 1484 up first), and 1458-1461 is ideal support, the top of yesterday’s initial move up. 1466 was today’s low.
The Nasdaq (second chart) has been on one wild ride. 2613, yesterday’s gap open, is important support, and 2700-2720 is resistance.
We still face another day of hedge fund withdrawals and confessions from financial companies, so the trading environment could remain volatile here.
Paul Shread is a Chartered Market Technician (CMT) and member of the Market Technicians Association.