What Once Acted As S&P 500 Resistance May Now Act As Support

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Stalled Trade Talks With China

Given trade negotiations with China have stalled, it may be helpful to identify some short-term S&P 500 (SPY) levels to watch. Market Studies, LLC has a tool known as “propulsion” which defines short-term momentum and determines potential support/resistance during those periods.

Propulsion identified 3,032 as a reasonable upside target and area of possible resistance on June 3, when the S&P 500 (VOO) was trading at 2,744. From the June low, the market rallied toward 3,032 and was rejected at that level in July (point A) and again in September (point B). The S&P finally broke above 3,032 on October 28. The concept of “what once acted as resistance, may now act as support” aligns with the current target/area of possible support which comes in at 3,041.

There is nothing magical about any technique to establish possible areas of support and resistance. The S&P 500 (SCHX) may or may not make a stand near 3,041. However, we will learn something from a probability perspective either way (holds vs. stays below).

Second Line Of Defense

This week’s stock market video, which can be found in a December 2 Seeking Alpha post, covered the “what once acted as resistance, may now act as possible support” concept from a different perspective. The 2,870-2,950 band of resistance below was in place for seventeen months. If the trade talks shift back into a hostile phase, it would not be shocking to see the market come back and test this previous band of resistance. If that is the case, we will learn something either way.

Reasons To Remain Open-Minded

When screens are covered in red, it can be helpful to review a wide range of hard data; recent posts have covered rare equity outflows and similar drops in ISM manufacturing data.

Disclosure: I am/we are long SCHX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.