The S&P 500 sliced below a key support level on Friday. This was followed by a 20-point decline short-term, but does it matter longer-term? Here are two charts that may have the answer.
Fridays drop, the biggest decline since January 28, drew the S&P 500 below important support at 2,090.
The green line and blue circles show why 2,090 is important for the S&P 500 (NYSEArca: SPY).
Support at 2,090 also coincided with the 20-day SMA, which actually complicated things as I pointed out via the Wednesday morning, March 4 Profit Radar Report:
“The S&P 500 fell 20 points in the first hour of trading. It briefly dipped below support at 2,090 and is now back above 2,090. This is also where the widely watched 20-day SMA is. Whenever a popular indicator coincides with our support levels, there’s increased potential for seesawing around that level.
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I suppose that a renewed break below 2,090 will lead to more down side. We will go short with a small amount on a break below 2,087.”
Prior to breaking support at 2,090, the S&P 500 was unable to overcome resistance at 2,110 – 2,138.
The February 25 Profit Radar Report showed this long-term chart and warned that:
“Today showed the first cracks in the strong price action. Some measures of sentiment continue to rise and market breadth is lagging. Creeper up trends like this usually end with a quick drop that erases several days of gains.”
The S&P 500 peaked on February 25 and has been drifting lower since. At least another dip lower is likely, and prior support at 2,090 is now resistance.
Despite broken support, my reliable ‘ultimate market top indicator’ still didn’t trigger a sell signal and seasonality is strong. This may only by a ’15-minute of fame’ scenario for bears.
The Profit Radar Report provides the next support and a detailed forecast on when a major market top is expected.
Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.
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