Stocks In The Heat Of Battle

Stocks have managed an impressive bounce from their early Wednesday lows at 1737 on the S&P 500.  But after a strong 60 point surge to 1797 to close out the week, it is reasonable to wonder whether stocks have further to run higher in the coming days or if a fresh move lower lies ahead.  How stocks behave in the early part of this week will go a long way in answering this question, as stocks are currently trading in a thicket marked both by various support and resistance levels.

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Friday was a particularly notable trading day, as stocks smashed back through potential resistance at both the 100-day moving average and the 1775 level on the S&P 500.  As a result, the 1775 range represents the first line of defense for any reversal lower in stocks in the coming days, with the next stop at the upward sloping 150-day moving average currently at 1741 and rising.

Stocks also now have some meaningful challenges in continuing their move to the upside.  The first line of resistance is at the downward sloping 20-day moving average currently at 1802 and falling.  The next is at the 50-day moving average that just recently turned lower and is currently at 1809.  And the third is at 1813 on the S&P 500, which represented the previous all-time high for the index first reached back in late November and has served as both resistance and support on several different occasions since.

In short, stocks currently find themselves in a fairly tight range where a number of support and resistance levels have converged.  How stocks respond to these various levels over the next few trading days will go a long way in determining how the market is likely to move in the coming weeks.

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