Stock market's near-term fate may depend on this S&P 500 'line in the sand', technical analyst says

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An early September wobble aside, stock-market bulls are hanging in there. The 4,450 level for the S&P 500 could be very important in the near term.

A post-Labor Day wobble aside, stock-market bulls are hanging in there, but much may ride on whether the S&P 500 can maintain important support not far below its current trading level, a technical analyst said Wednesday.

Stocks got off to a “stumbling start” to a holiday-shortened week Tuesday as U.S. investors returned after Labor Day, but weakness hasn’t been enough to “completely upset” the bullish setup, said Andrew Adams, in a note for Saut Strategy. The 4,450 level in the S&P 500 SPX “is still the rough ‘line in the sand’ I am using in the near term, and as long as we remain above there I think the odds support us going higher sooner rather than later,” he wrote. Adams said Tuesday’s performance, in which gains for megacap tech stocks masked significant weakness elsewhere, wasn’t the sort of reacceleration he had in mind.

The S&P 500 SPX was down another 0.8% on Wednesday morning, trading near 4,459. The Dow Jones Industrial Average DJIA was off around 207 points, or 0.6%. The Nasdaq Composite COMP shed 1.1%, on track for a three-day losing streak.Adams wrote: Still, the song remains the same — as long as dips in the S&P 500 hold above roughly 4450, then I expect an immediate upside resolution is more likely. Below there, and we’re going to have to worry about a retest and potential break of the recent low. And considering we’ve already witnessed what could very well be called a “retest,” I don’t have a lot of confidence in those lows holding once more, meaning the S&P may have a date with that 4200-4300 support zone after all.

 

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