Technical Talk: Is S&P 500’s price reversal significant?

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The comments below were provided by Kevin Lane of Fusion IQ.

Yesterday’s intraday sell-the-Fed-news price reversal on the S&P 500 stalled at the area (S&P – 1,079 to 1,106 area) where the index really accelerated its 2008 sell-off (red dotted lines). This area is likely to be more difficult to overcome and may take several attempts, and thus may cap the rally a bit while the index marks time and pulls back slightly or enters a higher level trading range.

While we believe liquidity and buying power remain strong and thus pullbacks should be relatively shallow in nature, that doesn’t mean we can’t get a corrective wave of some magnitude before this sideline liquidity is redeployed. Additionally, quarter-end window dressing may keep stocks elevated or from slipping too much. However, we do believe that putting new money to work in front of this more significant resistance level poses risks. Initial support below the current S&P levels comes into play near 1,040 level (green line).

Secondary supports if 1,040 were to give way would come into play near 980/975 then 950.

25-sep-09-1c

Kevin Lane, Fusion IQ, September 24, 2009.

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