Tuesday, November 06, 2007

1500 is key for the S&P 500

Since May of this year, a strong resistance/support line has been in place for the S&P 500 in the 1490-1500 price range.

In May and June the index never closed below 1490, but came within 10 points of doing so on 4 separate occasions. After plunging below 1490 on July 26 to start the most recent correction, the S&P 500 never closed above 1500 until the correction ended on September 18. Since the end of that correction, the index has bounced off of the 1500 level several times without closing below it.

So I think the S&P 500 index level of 1500 is key for the next couple of months. If the market closes below that level then I think it will have room to fall through the 1400's before recovering. But if the market can remain above 1500 though the winter, then I doubt we will see 1400 again.

Update - November 7: Just one day after this post, the S&P 500 obliged and fell below 1500 on its way to a correction. I now expect 1500 to be an upper resistance line until the correction is over.

Update - January 22: For the record, now that we're in the next "crash of the decade," I don't think S&P 1500 will have any relevance for quite a while.

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