The S&P500 dipped briefly below the 50-day moving average today before staging an afternoon rally to manage a close ABOVE that important level. The 50-day is rising and hasn’t been closed under since June 2018. As an old trading mentor told me long ago: “Nothing bad happens as long as price remains above a rising 50-day moving average.” So far, that mantra has NOT been violated during this correction.
We tagged the top of a gap from Aug 23rd and 24th at today’s low. There is another open gap near $282 on SPY. Given the daily chart of the SPY ETF, I’d be shocked if price CLOSED below $280 on a daily chart in the relative near term. The support from the $282 gap and the August 15th low should give the market a nice bounce point to jump upward from as a TRADE (which means you need to book profits and mind your stops if you take the trade). The bounce could last a few hours, a few days, or give the market a nice leg up to new highs. On the other hand, *IF* we close below the $279-280 level near the lows of the day, I’d be very concerned about the health of the stock market and worry that a visit to the 200-day moving average near $276 or the bottom of the 2016 channel near $273 could be in the offing. Something to consider and plan for as a long term investor if price should get down that low. Enjoy your weekend. Dr. J