In focus: Cracks in the armor?

By Lawrence G. McMillan

The Standard & Poor’s 500 Index pulled back sharply over the last two days. Ostensibly, this is in response to the FOMC minutes that were released yesterday, in which the Fed seemed to indicate that it was not considering another monetary intervention (“QE3”) at this time. That shook all markets, including stocks, but especially gold.

Despite the fact that the S&P 500 SPX +0.18%   pulled back sharply over the last two days, it is still above the support levels that we consider significant. The highest of these support levels is at 1,385-1,390. Today’s low was approximately 1,394. So, support is still holding. Below that first support level is a more solid one at 1,370, and then very strong support at 1,340.

The 20-day moving average of SPX, which is support in some people’s eyes, is at about 1,400. The long-term trend line identifying this bull market is now at about 1,330. A violation of that line would be very bearish, but we do not expect that will happen anytime soon...

To read the full article, subscribe to The Market Watch Options Trader.