Technical analyst emphasizes the importance of the S&P 500 maintaining support above current trading level.
Stock-market bulls are showing resilience despite a slight wobble after the Labor Day weekend, but the future may hinge on whether the S&P 500 can sustain crucial support just below its present trading level, according to a note from Andrew Adams, a technical analyst at Saut Strategy.
Although stocks experienced a stumbling start to the shortened holiday week on Tuesday, US investors returning from Labor Day, the prevailing bullish setup has not been completely disrupted. Adams indicates that the key level to watch in the short term is 4,450 on the S&P 500 index. As long as the market remains above this level, the odds favor an upward trajectory sooner rather than later.
In a tweet last week, Adams stressed the significance of this level, and Tuesday’s performance did not match his expectations for a renewed acceleration.
As of Wednesday morning, the S&P 500 was down by an additional 0.8%, hovering around 4,459. The Dow Jones Industrial Average similarly declined by approximately 207 points (0.6%), while the Nasdaq Composite experienced a 1.1% drop, potentially leading to a three-day losing streak.
Adams cautions that if stocks remain near recent lows for an extended period, the likelihood of testing and potentially breaking them increases. In his note, he states, “Still, the song remains the same — as long as dips in the S&P 500 hold above roughly 4450, then I expect an immediate upside resolution is more likely. Below there, and we’re going to have to worry about a retest and potential break of the recent low. And considering we’ve already witnessed what could very well be called a ‘retest,’ I don’t have a lot of confidence in those lows holding once more, meaning the S&P may have a date with that 4200-4300 support zone after all.”
Despite the uncertainties, stock-market bulls continue to hold their ground amidst the post-Labor Day wobble. The fate of the market will depend on the S&P 500’s ability to retain its important support level, which remains a critical factor in determining its future trajectory.
