From MoneyBeat, Tuesday Apr. 8:
There is a fight going on at the 1840 level on the S&P 500, and that fight will likely decide the market’s next move. It’s a key level, and a lot of smart market types watching it.
After rising as high as 1897 intraday, the S&P 500 took a straight dive down, and is now bouncing and churning around this key support level. The index tested it briefly at the open, falling to 1841.95, bounced off it again, then came back to it again. The day’s low, so far, is 1839.92. UBS'sUBSN.VX -0.33% Art Cashin puts the critical range between 1837-1840. John O’Hara at FBN thinks the market is going to churn in the 1820-1840 area this week, and test that lower boundary. “That would be a good set-up for a rally into week’s end,” he wrote.
“Remember,” Joan McCullough at East Shore Partners wrote, “the hot dogs all have pretty much the same script.” In other words, everybody’s watching the same numbers. So if there’s a break one way or another, a scramble is likely to follow.
The fall to this level represents the leading edge of a correction similar to the one earlier this year, according to Asbury Research. The firm looks at the “rate of change” in the S&P 500 – the percentage change between the most recent price and the price 21 days ago. With Monday’s slide, this rate of change “has now moved meaningfully into negative (bearish) territory,” the firm wrote in a note, “which indicates that the U.S. broad market index is beginning a pullback/correction.”
That shouldn’t come as much of a shock. The markets have been rising in more or less a straight line since August of 2011 (the last time there was a significant selloff), punctuated with these minor course corrections. Indeed, you can look at the S&P 500 over the past year, and draw a line connecting all the low points. Roughly speaking, that’s the long-term trend line, a support level that the index has yet to break. That’s one reason none of the mini-corrections recently have amounted to anything. This long-term support level has held. The index would likely have to drop decisively below 1800, in fact, to break this trend.
- The S&P 500 and its “rate of change,” with negative rates shaded in pink.
- Asbury Research
Which is one reason why you won’t see anybody in the market getting very concerned right here. Until a long-term uptrend is broken, this is all just backing-and-filling, as they like to say....MORE
