Market Update

The S&P 500 has bounced over the past several trading days, gaining a little more than 8% from its intraday low of 1,011 reached on July 1st through its close at 1,096 today. The latest move isn’t totally surprising, since the market was oversold on many measures at its recent low. However, technical damage was incurred on the way down, and we now see several levels of resistance that the market must make its way through before the overall picture begins to improve.

The first hurdle ahead is the flattening 200-day moving average (brownish line on chart) at 1,112, which is just 1.5% higher than today’s close. Next up is the June 21st intraday high of 1,131, which is about 3% higher. After that is the January 19th high at 1,150, a 5% move higher. Then there’s the May 13th post-flash crash bounce high of 1,173, which is 7% up from here. Finally, the recent rally high of 1,220 reached on April 26th looms, which is about 11% higher. In addition, the market currently appears to be trying to break through the down-sloping trend line that connects the April and June highs, which would be the first sign of progress if accomplished.

In short, from a technical perspective, we see multiple levels of resistance that the market must work through before regaining the upper hand and possibly resuming the rally that began 15 months ago. Despite the recent bounce, we are not out of the woods yet.

Chart: S&P 500 with downtrend line (blue) and resistance levels (red)