Wall Street defends key line of defense

When stocks were getting bombarded with bad news on trade, tech privacy lapses and interest rate fears, Wall Street was holding out hope the U.S. market could defend a key line of defense that had been in place for 442 trading days.

Fortunately for the bulls, the S&P 500 stock index briefly gave up that key level — around 2,590 — in Monday’s big selloff but then was able to repel the aggressive push from bears to avoid a much larger market decline.

Since defending the market’s average price over the past 200 days — a level viewed as a long-term trend line — stocks have rebounded to the upside. The S&P 500 is up more than 3% from Monday’s close and is now trading at around 2,663.

This type of bounce after a tough stretch is not uncommon, as the socalled 200-day moving average is viewed as key level of price support — or price floor — which tends to lure in buyers once it’s clear the market won’t break sharply below.

“The punches keep getting thrown, but the market has managed to hang in there,” said Chris Verrone, a strategist at Strategas Research Partners.

The market’s big reversal Wednesday — when the Dow swung from an early loss of 510 points to finish up nearly 231 points — was another sign that buyers have not abandoned the market and that the “market is trying to put in a low” after a rocky stretch, Verrone added.

Verrone now wants to see more stocks heading back up and says Wednesday’s low “marks another line in the sand” for investors to watch.