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S&P 500 Holds Numerous Support Levels

David Becker
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The S&P 500 index was able to hold support level and with the bounce off last week’s lows, the large cap index has moved back above the monthly trend off the 2011-2012 lows. This level also coincides with some moving averages on shorter time frames. The confluence of support from the monthly trend lines, the weekly moving average and the daily charts horizontal support is very supportive for a bounce. The price action had not been near this trend line throughout 2013. Recently it touched it in February and April. Last weeks low was the first dip below the 2011 trend line. Failure to hold and close above this 6-year, monthly line would be a big signal on the primary trend.

Obviously the lows for the $SPX are the same on all the charts, but the difference this time is the first break below the monthly trend line for over 3 years. The change in slope on the daily is what is causing this test of support now. A major channel on the daily chart has been holding the price between it for a while. Moving down to the MACD, the MACD appears to be turning back up from a typical momentum support level shown on the MACD plot as a blue line. By using the latest lows and highs to create a channel on the price plot, the slope has moderated somewhat.

What is important about this change is that the price action has moved down toward the long term primary trend line on the monthly charts. If the price was to move down to the bottom of this channel, it would test the 200 Day Moving Average – 200 DMA around 1870. The concerning part of that test would be the move below the primary monthly trend.

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