As we move up off the key “Edge of a Cliff” level – 1,040 – in the S&P 500, let’s take a quick look at the reference levels to watch as potential resistance on the S&P 500 on the bounce.

The most obvious overhead level for a short-term ‘make-or-break’ level is again 1,110.

You don’t have to get fancy to know that – we hit that level two times recently after the May low and buyers failed to push the index beyond that level – thus, it is the key for now.

If you do want to get fancy, though, 1,110 is the 38.2% Fibonacci Retracement (1,108 actually) and 1,108 is currently the very important 200 day SMA – which we’ve also tested twice and failed to overcome.

Should buyers jam the index beyond 1,110, then it would likely create a quick “Short Squeeze” or popped stops breakout situation that could quickly send the index to any of the following upside targets:

1,120 (50 day EMA)
1,130 (50% Fibonacci Retracement)
1,150 (61.8% Fibonacci Retracement and key price level)

To make it abundantly simple, the pathway forward (in terms of reference levels) seems to be:

IF above 1,110 THEN expect 1,150
IF under 1,110 THEN expect 1,040

Basically, what that says is that we remain in a short-term trading range between 1,040 and 1,110.  The range will continue to hold until we get a breakout – and we will – in either direction, which should lead to a continuation move.

Reference the following prior updates:

“Bulls Willing to do Anything to Avoid Falling into the Abyss”

“Third Time’s a Charm?  SP500 Tests Line in the Sand”

S&P 500 Poised on the “Edge of a Cliff”

Edge of Cliff Level to Watch in the Russell 2000

And for the reason why we watch key levels:

“So… Why Exactly is Technical Analysis Important?”

Be safe.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade