You can see that we are at a key inflection point for the stock market. The level just above 1550 on the S&P 500 has served as support for quite some time. Since we broke up and through the range I show you on the chart in the video at the beginning of March, this level has served as support several times.
On the chart in the video, I point out the long wicks on the candlesticks, showing that at one point during those trading days, we saw the market drop down below those levels, but the bears were unable to hold onto those gains. We saw the bulls recover just enough to push things back above the support level at 1500. That is going to be a key support level, especially with the downward pressure that we have seen in the market during the past couple of days.
We had a little bit of a recovery Tuesday, but all of that was erased Wednesday, and we’re sitting right at the precipice of about 1550. If we break through that level, it doesn’t take much of a stretch of the imagination to get us back down to the 1500 level on the S&P 500.
It seems like we have a support level about every 50 points on the S&P. On the chart I show you 1450, and then again down at 1400, so every 50 points we seem to have a support level along the way down. Now, we’re not forecasting that we’re going to be all the way down to 1400 any time soon, but as we do look at the stair-step fashion in which the S&P 500 rose during the past couple of months, it does cause us to bear in mind that that same stair-step fashion could materialize if we were to see a break of this key support level at 1550, so we are watching that very closely.
Investor Place advisors John Jagerson and S. Wade Hansen are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next trade and get 1 free month today by clicking here.