With the S&P 500 bumping into (actually two points above) the 1800 mark Monday morning, investors and traders found a simple yet often effective reason to take some risk off the table. Big, round numbers on the indices — after acting as a magnet — often act as an initial repellant once they are hit.
Monday’s selloff didn’t really take place until activist investor Carl Icahn made some comments about a potential dip in the market. Quicker trades that looked to fade the first bump into 1800 on the S&P 500 likely used Icahn’s comments to press the market a little lower.
Beyond that, however, I’m not sure when Carl Icahn suddenly became an intraday indicator for the broader market. (Which is to say, I don’t think folks will pay much attention to him beyond the companies he is involved in on the activist side.)
The Dow Jones Industrial Average on Monday hit the 16,000 mark and failed lower intraday, but just like the S&P 500, the Dow Jones didn’t leave much damage behind on the day. For the most part, the party in equities continues — many sectors remain in good technical shape, and the market has a seasonally favorable period at its side.
In terms of some technical levels to focus around on the Dow Jones and the S&P 500, given that both indices are trading just off their all-time highs set on Monday, upside resistance levels are remarkably easy to determine.
For the S&P 500, initial resistance is obviously around 1800, followed by 1820 and 1850. Initial support for the index is at its 21-day simple moving average (yellow line), which currently also coincides with the index’s latest breakout around 1770, give or take a few points.
The Dow Jones for its part staged a clean breakout past last week, out of a trading range that dates back to March. The index might well be somewhat overextended in the near term, and a retest or even slight undercut of the breakout level is possible. This would bring the index down toward its 21-day moving average (yellow line), all of which comes together around the 15,700-15,770 area as support for the index.
Resistance for the index is at 16,000, a break above which could easily get it moving to 16,200.
Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.