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A very volatile but ultimately constructive day for U.S. stocks
06/23/2011 6:37 pm EST
Stocks opened down strongly in New York. At 10:51 a.m. New York time, the S&P 500 was down to 1262.87, which turned out to be the low of the day. That level represents key support for stocks at the June 15 low (1265), the 200-day moving average (1263), and the March 16 low of 1256.88.
If stocks had kept falling through those levels, it would be a sign that the body of investors didn’t think stocks were a reasonable buy, considering the risk, at that price. And we could have started to look for a further fall and support at a lower level.
But those levels held. The market did have another dip at 2:49 New York time to 1267.50, but stocks rallied strongly in the last hour to close at 1283. That was down just 3.6 points for the day.
An intraday reversal like this isn’t a guarantee of anything. The news tomorrow on some front—U.S. durables orders or the Greek debt crisis—could still be bad enough to take out support at 1257-1265.
But the fact that stocks were able to stage this kind of recovery after challenging support is a constructive sign.
Think of it this way: enough traders and investors were willing to buy at 1262.87 with all the news event risk that hangs over this market to make stocks reverse course in the later part of the day.
If we can just get a day when the news isn’t so relentlessly grim….
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