What to watch

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

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.