What to watch

First line in sand for S&P 500: 2,120 level

- Adam Shell @adamshell USA TO­DAY

Stocks are un­der­go­ing a rocky patch, prompt­ing the ques­tion: When does the re­cent price de­cline beget steeper de­clines?

For an an­swer, USA TO­DAY turned to a Wall Street an­a­lyst who iden­ti­fies mar­ket trends by the price ac­tion and chart pat­terns of the Stan­dard & Poor’s 500 stock in­dex. Mark Ar­beter, pres­i­dent of Ar­beter In­vest­ments and for­mer tech­ni­cal an­a­lyst at S&P, says the first level of im­por­tant sup­port — or price floor — for the S&P 500 (which closed Wed­nes­day at 2,125.77, or 2.9% off its Aug. 15 high) is 2,120. Why is 2,120 so im­por­tant? “It was the re­cent in­tra­day low on Mon­day and Tues­day,” Ar­beter ex­plains, adding it also marked the break­out level for the S&P 500 in July when stocks shot up af­ter the short-lived Brexit sell-off in June.

Mar­ket “tech­ni­cians” like to see stocks stop go­ing down at “sup­port” lev­els that found buy­ers in the past. But just be­cause the first level of sup­port is bro­ken, it doesn’t spell doom.

The next S&P 500 sup­port level to watch is 2,105, which rep­re­sents an in­ter­me­di­ate trend line that dates to the mar­ket lows in Fe­bru­ary. If that line of de­fense fails, Wall Street will then eye the 200-day mov­ing av­er­age, which shows the av­er­age price of the S&P 500 over a 200-day — or long-term — pe­riod. That level is 2,060. A de­ci­sive drop be­low that long-term price floor sug­gests the up­ward trend has been bro­ken.

But so far, the mar­ket has suf­fered “very, very mi­nor tech­ni­cal dam­age,” Ar­beter says.

Newspapers in English

Newspapers from USA