Will The Psychological Barrier Hold?

By Lawrence G. McMillan

Yesterday, the market saw two distinct “halves.” In the first half, the market rallied fairly well – once again trying to prove that there is no follow-through to big moves. In the second half, the FOMC minutes spooked traders, and prices fell sharply. $SPX penetrated well below the 2040 level, reaching 2034.49 intraday. But then, to once again prove that there is no follow-through, $SPX rallied into the close. So $SPX has not closed below 2047 in weeks. The intraday spikes downward on the chart have reached below 2035 a couple of times, but they obviously have not had much effect. Today, the bears get another chance. S&P futures are down 5 points this morning (and were down a bit more), meaning that the 2040 level is still in play. It has now become a psychological barrier of sorts. I would think that a close below 2040 would still be a sell signal for many technically-oriented traders...

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