Sign in
Become a MarketWatch member today
The Technical Indicator
Aug. 10, 2010, 1:50 p.m. EDT · Recommend · Post:
View all The Technical Indicator "º
"¹ Previous Column
S&P holds tenuously above the 200-day average
First Take "º
Economy needs more help, Fed says
By Michael Ashbaugh, MarketWatch
Editor's Note: This is a free edition of The Technical Indicator, a daily MarketWatch subscriber newsletter. To get this column, including 100 technical stock picks every month, click here .
CINCINNATI (MarketWatch) - The Standard & Poor's 500 Index started August with a sharp break atop its 200-day moving average.
Since then, each August close has come in above the 200-day, an area that remains an important bull/bear battleground as detailed below.
The S&P 500's hourly chart details the past three weeks.
As illustrated, the S&P survived last week's jobs report, reversing this week to retest its range top.
From current levels, the 1,107-to-1,115 area remains a notable inflection point - bracketing the "jobs-report" low and the 200-day - while conversely, initial resistance spans from 1,128 to 1,131, bracketing the June and August peaks.
Meanwhile, the Dow industrials' near-term view is similar.
As detailed on Monday, significant resistance spans from 10,703 to 10,730 - bracketing the January and August peaks - while notable support holds at last week's low of 10,515.
The Dow closed Monday at 10,698.
And the Nasdaq Composite's near-term view rounds out the major U.S. benchmarks.
As illustrated, the index closed Monday at 2,305, matching significant resistance at the July peak of 2,307.
With Tuesday's negative start, initial support holds at its 200-day moving average, currently 2,267, and is followed by last week's low of 2,254.
Widening the view to six months adds color.
Two inflection points stand out:
Resistance at the July peak of 2,307.
Support spanning from 2,254 to 2,267, bracketing the August low and the 200-day moving average. (The 2009 close held at 2,269.)
Looking ahead, the bull case gets the benefit of the doubt barring a decisive break below the 2,250 area.
Moving to the Dow, its six-month view remains the strongest.
Again, two technical areas stand out:
Resistance spanning from 10,703 to 10,730, bracketing the August and January peaks.
Support at the 2009 close of 10,428, matching its 200-day moving average of 10,433.
Market bulls remain on the offensive barring a violation of the 200-day.
And the S&P 500's six-month view highlights the real bull/bear battleground.
For the time being, the index is crammed between two significant technical areas:
Support spanning from 1,107 to 1,115, bracketing the August low and the 200-day moving average.
Resistance spanning from 1,128 to 1,131, bracketing the June and August peaks.
The S&P closed Monday at 1,127, and has notched six straight closes above support. Tentatively constructive price action.
Despite Tuesday's negative start, the U.S. markets remain on guardedly bullish technical footing.
Returning to the SPDR S&P 500's /quotes/comstock/13*!spy/quotes/nls/spy (SPY 112.82, -0.17, -0.15%) backdrop makes the point.
Very simply, each August close has thus far come in above the 200-day moving average.
And as always, the 200-day generally defines the longer-term trend, with a posture above this level signaling a primary uptrend. (While it's debatable whether the market is trending, this is a nonetheless constructive technical price action.)
Moreover, the S&P survived a serious threat to its 200-day last week - following the weaker-than-expected employment report - with the index reversing from support on strong volume. Also constructive price action.
The Federal Open Market Committee said Tuesday it would reinvest the proceeds of its investments in mortgage-backed securities as they mature into Treasurys. As economic stimulus goes, this is pretty thin gruel.
Read Full Article »