3 Resistance Levels for Traders to Watch Right Now

The SPX found itself back below its pre-FOMC close at 4,175 at week’s end

“ We enter this week’s trading and a new month just below the lower boundary of a volatile range since January between 4,150 and 4,600, and at the top rail of a bearish channel in play from November into mid-March. Short-term sentiment measures and a pickup in VIX put volume indicate we could see more short-term bursts higher, though moves above resistance levels … may prove fleeting… rallies may be short lived, perhaps even weaker in magnitude than the bullish action from mid-to-late March. As such, they should be used to lighten up on bullish positions or to hedge long positions, if you haven’t done so already…a move north of 4,375 can only happen if the 4,300-century mark is taken out.”

- Monday Morning Outlook, May 2, 2022

In last week’s commentary, I discussed the extremely poor technical backdrop with respect to the S&P 500 Index (SPX — 4,123.34), the Nasdaq-100 Index (NDX — 12,693.53) and the Russell 2000 Index (RUT — 1,839.56). I even went as far as saying that the NDX and RUT were in bear markets based on both the consensus definition of a bear market (20% below their closing highs) and our definition of a bear market, which is a monthly close below a long-term moving average, such as a 24-month, or two-year, moving average.

While the SPX has not met either criteria, I expressed concerns that within the context of the other major indices entering bear market mode, sentiment indicators that we closely track are behaving more like what we have seen in bear markets versus bull markets.

As such, I cautioned that with sentiment growing negative, sharp and quick rallies could occur, but with the major indices trading below major support levels, unless and until those levels were taken back, rallies should be sold.

One potential resistance level that I focused on…

Todd Salamone is Schaeffer’s Senior V.P. of Research Continue Reading: https://www.schaeffersresearch.com/content/analysis/2022/05/08/3-resistance-levels-for-traders-to-watch-right-now

Originally published at https://www.schaeffersresearch.com on May 8, 2022.