The 1100 Price Level in the SP500

Sep 7, 2010: 9:12 AM CST

This morning, we saw price pause and decline from the 1,100 level in the S&P 500.

Let’s take a closer look at that level to see its significance, and the other key reference price levels to watch that have more importance.

S&P 500 “Pure Price” Daily Chart:

Let’s start first with the horizontal (highlighted) line I drew at 1,100.

For the most part – with the exception of late February – this level has been a short-term overhead resistance area.

Notice the five red arrows drawn that show the resistance price encountered at the 1,100 level in the past.  Watch for further signs of downside continuation that would clue us in that resistance is holding yet again.

Beyond 1,100 – which is only short-term resistance – the most important upside resistance level to watch is clearly 1,130, and a break above that should send the index higher in potential breakout mode.

By the same logic, the most important lower support level is 1,040, and a break under that should send the index to retest the 2010 low of 1,010, with a break under 1,000 being very significant.

Let’s now add on our standard indicators to see the current picture of the S&P 500 Daily Chart:

Volume declined steadily since peaking during the “Flash Crash,” though if you look very closely, volume rose during sell-swings and then declined during rally swings.  That’s bearish.

We still see the importance of the trading range between 1,130 and 1,040, and now the respective 20 and 50 day EMAs have ‘flatlined,’ which means they lose their predictive ability as support or resistance bands.  Price slices through flat EMAs in the context of a trading range – as is occurring now.

For the most part, I suggest monitoring key price levels rather than trying to get really complex with your analysis and indicators.  Price is in a sideways trading range, which many traders report as the most difficult periods to trade.

If we get a breakout soon, fine, but until then, you might want to play more cautious within the context of these boundaries and monitor your positions a little closer.

Corey Rosenbloom, CMT
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3 Responses to “The 1100 Price Level in the SP500”

  1. Terlyn12001 Says:

    To me it looks like a wave B of an A-B-C correction at the moment, 10:30am Tuesday.

  2. A Says:

    Great article..very educational..

  3. Swing Trading Dude Says:

    Nice analysis….I'm retweeting to my peeps!