Next Stop: 1,020?
10/03/2011 6:00 pm EST
The S&P 500 closed at 1,099.23 on Monday, well below the 1,119.46 August 8 closing low—a support level which has held for the past two months. If it stays below 1,100, we could be heading lower still.
“Key chart support for the S&P 500 from the August lows is between 1,110 and 1,120,” wrote Mark Arbeter, chief technical strategist of S&P Capital IQ, in a technical comment late last week. “An eventual break of this support, which we see, would open the door to the next major piece of technical support in the 1,020 zone, in our view.”
“A drop to 1,020 would equate to a 25% decline from the April 29 bull market closing high of 1,363.61,”, he continued.
Arbeter, you might recall, was one of the first to call the end of the bull market way back in May and June. He also was one of the four leading technical analysts I spoke to in early August to identify 1120 as a critical support level, which, if we broke it, would take the market much lower.
We’ll need to see if the S&P stays below 1,100 to 1,120. As I’ve said repeatedly, you should use any snapback rally to 1,200 or so to reduce your stock holdings. At this point, it may be too late for that, so I’d sit tight.