As seen in the chart above the S&P 500 is stalling and reversing off a resistance zone in the 1,298 to the 1,293 level (red lines). This follows the recent breakout and base completion above the 1,257 level (upper green dotted line). That said we would expect to see the S&P 500 hold pullbacks toward this 1,257 area (upper and dotted green line). This area also coincides with a minor uptrend line near the 1,253 area (black line).
If this first support level does not hold, secondary and more firm support lies in the 1,230 area (lower green line). Our opinion is the bottoming formation that took place over the last three months looks to be real. However if this is the case then these supports should hold. Thus we are watching, very closely as to how the market trades in and around these support levels. Holding and reversing back up would suggest the recent bottoming action was real. Conversely breaking those supports would suggest this recent action was nothing more than a very aggressive oversold bounce.
Stay tuned …
FusionIQ S&P 500 Technical Snapshot
Fusion IQ, October 31, 2011