The S&P 500 Index ($SPX) made a new all-time high on May 7th. Since then, a correction has been underway, and there have been several times in the last week when I'm sure that both the bulls and the bears thought they had taken control. There were two rather violent declines, both terminating near the 4060 level, so that is now the first support level. Both of those declines were followed by furious rallies back to the slightly declining 20-day Moving Average. A breakout from the current range should see follow-through in that same direction.
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On Friday, May 7th, $SPX broke out to a new all-time high and so did the Dow ($DJX). However, after an early Monday morning rally, things reversed badly, and $SPX dropped sharply for the first three days this week, losing a whopping 173 $SPX points.
But there was no follow-through the next day, and in fact $SPX has rallied strongly, regaining the 4120 level and more.
From early March through mid-April, $SPX was on a tear. Since then, it went mostly moved sideways, while establishing a support area near 4120. Now it's broken out to the upside again. Below 4120, there is support near 4000 (the March highs), but that is an area that was never tested, since $SPX just blew right through the March highs on a double gap move higher in early April. Finally, the support at 3850-3870 is still important, for that is the area from which the current leg of this rally was launched.
Whenever the market has an extended bull run, such as it's having now, it begins to put a lot of distance between the current value of $SPX and its 200-day Moving Average. Inevitably, some "analyst" posts the fact that "$SPX is x% above its 200-day Moving Average" and then alleges that disaster is at hand. Usually, a deluge of similar analyses follows. Those types of statements are usually wrong, or at least misleading. Two things that are rarely explored in these articles are: 1) when is disaster going to be at hand, and 2) is percent really the measure we want to use, rather than standard deviations?