S&P 500/Dow Highlights:

  • S&P 500 has support just below, but break and a big test could be on its way
  • Dow Jones closes down for 8th consecutive day, has 200-day coming up

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S&P 500 has support just below, but break and a big test could be on its way

Yesterday’s decline in the S&P 500 put it one step closer towards a very important test should it fail to hold above a pair of swing highs carved out last month around the 2742 mark. There is also trend-line support in the current vicinity depending on how you draw the line. In one instance it’s broken, but using a more conservative approach it has yet to break – we’ll give the final angle the benefit of the doubt to play it safe.

In any event, a break below the aforementioned May highs will have the trend-lines broken regardless of how one draws them. After a wobbly sequence of overlapping price action since the March low, a more sustainable down-move could soon come to roost.

This would have the very important February 2016 trend-line/200-day combination back in play once again. It’s held the market up on three prior occasions, but can it do it for a fourth time? A breakdown below this powerful bull-market threshold could spell big trouble for the market as the summer heats up.

A hold, though, right here can stave off those thoughts for another day and possibly etch out yet another higher low without having breached support levels. Things could start to get very interesting here, or perhaps price action simmers back down and we get a choppy summer trading environment.

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S&P 500 Daily Chart (Watch nearby support)

S&P 500 daily chart with support nearby and even bigger trend support below

Dow Jones closes down for 8th consecutive day, has 200-day coming up

The Dow posted its 8th consecutive down day yesterday, and according to Chief Strategist, John Kicklighter, that matches the longest streak since February 1984. The streak has the 200-day squarely in sight at 24254, which also matches up very closely to the low of the last pullback in late-May.

A bounce on first arrival seems likely, but should that be all it is proven to be, a seller’s bounce, a decline down into the mid-23000s would make for a very interesting big-picture test in conjunction with the S&P pressing down on its own major threshold.

Dow Daily Chart (200-day just below)

Dow Jones daily chart with 200-day MA just below

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX