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Market medals: S&P 500 hurdles 1947 level

The stock market’s wobbly floor has held up under a barrage of selling early in 2016. Now Wall Street is wondering if the Standard & Poor’s 500 can hurdle higher levels that have acted like price ceilings this year.

Since the stock carnage began on the first trading day of the year, the S&P 500 has stalled twice this month at 1947, unable to break the imaginary price barrier. Thursday it made a third run at 1947 and finally topped it, closing up nearly 22 points, or 1.1% to 1951.70.

It might seem wonkish to talk about stock price supports and ceilings, but the reality is many traders act on signals sent out by the market’s chart patterns. Not only is 1947 a level that has proved difficult to bust through, the S&P 500’s average price over the past 50 days is around 1945.

So breaking out above these key levels would be a bullish signal, at least in the short term, says Mark Arbeter, editor of Arbeter Investments newsletter.

“Many traders and hedge funds ... use the 50-day moving average as a kind of marker to be bullish or bearish,” Arbeter wrote. “It’s like an intermediate line in the sand. Above the 50-day average, get bullish; below, stand clear.”

If the S&P 500 can stay above 1947, the next line in the sand is 1963, then 2000. Why is 2000 a key level? “It’s where buyers bought the market and are now sitting with losses,” Arbeter wrote. “When you’re on the losing side of a trade, breaking even is the goal.” Thus, people will sell when they recoup their losses.