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S&P Watch: Testing the Bounce

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Can we hit the 200-month moving average?

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Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community.

I don't always pay attention to the long view for short-term trading - not because I ascribe to the Keynesian idea that "in the long term, we are all dead," but because I believe longer term returns will take care of you if you're vigilant enough in the short term.

But like all technicians, I 've been paying close attention to this monthly chart on the S&P 500.


Click to enlarge

After the latest action in the markets, it's at a very important point, having already bounced to lateral trendline support after breaking it to the downside. (One might see different variations of this trendline; I prefer using closing figures.)

Some observations from this chart:

1. This is the moment of testing the mettle of the market. After being on a buy watch since March 2, we are the cusp of testing if the S&P 500 can take out this first break.

2. If the market can tread water here and not give back much, the bounce could last up to the 200-month moving average, which is the closest resistance.

3. Breaking the 200-month moving average has been a very rare event for this index.



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