The S&P 500 Is Challenging Support

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On Friday, stocks fell after a positive opening and the announcement that the Trump White House was pulling their replacement health care bill, The American Health Care Act (AHCA), for lack of supporting votes. The Dow Jones Industrial Average closed off 0.3%, the S&P 500 fell 0.1%, the Nasdaq gained 0.2%, and the Russell 2000 rose 0.1%.

The stock market, as measured by the S&P 500, fell 1.4% last week, its biggest weekly loss since the November election. The market’s loss was viewed by many investors as being directly tied to the GOP’s failure to pass the AHCA, and some questioned the president’s ability to move ahead with the rest of his growth-oriented programs.

The stock market may be “overvalued,” according to a Bank of America portfolio-manager survey. BofA found that 34% of respondents say stocks are “overvalued.” This is the highest percent since the survey began 17 years ago. And The Wall Street Journal reported that the forward price/earnings ratio (analysts’ expectations for the next year) is “near the highest since 2014.”

Crude oil (WTI) spot closed on strength, up 0.7% to $48.01 per barrel. However the energy stock sector in the S&P 500 fell 0.5%.

At the close, on Friday the Dow Jones Industrial Average fell 60 points to close at 20,597. The S&P 500 fell 2 points to 2,344, the Nasdaq closed at 5,829 for a gain of 11, and the Russell 2000 gained one point at 1,355. The NYSE’s primary exchange traded 367 million shares with total volume of 3 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board advancers exceeded decliners by a small margin, and on the Nasdaq, advancers led by 1.3-to-1. Blocks on the NYSE were slightly less than the 6,190 traded on Thursday.

 
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the S&P 500 Is Challenging Support

Last week’s fall of 1.4% broke the support line of the S&P 500 at 2,350. The significance of 2,350 is that it formed the base of a right triangle with resistance at the 20-day moving average at 2,368. Wednesday’s CBR Buy signal had the potential to move back into the triangle, but it appears that the decline on Thursday and Friday may have ended the rebound.

Conclusion: The resistance line at 2,350 still could be surmounted, but if the CBR Buy signal from my proprietary internal indicator, along with the 50-day moving average at 2,331, is pierced, watch out below. The next major support is the band from 2,277 to 2,301.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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