S&P500 Today: Will Buyers Clear 6831.50 or Fade Into the Close?

Bears Stay in Control Despite the Bounce

The major U.S. stock indexes are lower on Tuesday, but rebounding from a steep plunge on the cash market opening. Volatility continues to be the main theme with sellers coming in on rallies and buyers reacting to the dips. Despite the whipsaw price action, the bears are still winning this round compared to last Friday’s close. This week’s price action indicates the market wants to go down, but it looks as if the bears are going to take it lower one step at a time instead of crashing.

Some people prefer the crash method because it’s over quick and it doesn’t weigh on the investor as much. A prolonged move in time is more painful to endure because with each turn up, there’s the feeling that this is the bottom and it only leads to disappointment. Personally, I prefer a series of steep breaks, followed by an elongated support base. Spike bottoms tend to be sold quickly because they’re usually formed by a combination of speculative buying and short-covering. Elongated support bases are the best because they wear out the shorts and leave nearly all new longs for the next rally.

S&P 500: Buyers Step In at the Retracement Zone

The S&P 500 Index (SPX) is in a downtrend if you measure it by the swing chart or the moving averages. Investors are now looking for value. To some, it’s nearly every previous bottom like yesterday’s low. Today, buyers are playing the retracement game, re-entering inside the 50% to 61.8% retracement zone at 6762.10 to 6705.42, respectively. If today’s intraday rally fails to lead to a positive close, then tomorrow it may lead to a dump into the 200-day moving average at 6569.42 and the long-term 50% level at 6566.52.

Mid-Session Update: Watch 6831.47 for Direction

As we approach the mid-session, we can see the reaction from the retracement zone. Earlier today, the SPX hit 6710.42, just above the 61.8% retracement level at 6705.42. Given the short-term range of 6952.51 to 6710.42, its 50% level at 6831.47 is our first objective. Trader reaction to this level will set the tone into the close.

Overcoming 6831.47 will increase momentum into the close with the 50-day moving average at 6902.90 the main objective. A failure to reach 6831.47 will indicate the presence of sellers. A break back under 6762.10 will indicate the selling is getting stronger into the close. Taking out 6705.42 late in the session will set up the index for an even steeper break into the 200-day moving average at 6569.41 and the long-term retracement zone at 6566.52 to 6483.01.

The Bigger Picture: Waiting for a Better Entry

Right now, I see a market hooked on the momentum of the moment with traders willing to trade the intraday swings. While I believe in the long-term bull market, I’d prefer to start the next bullish campaign from a better value area and after a support base is formed.

More Information in our Economic Calendar.