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Support isn’t far away on S&P500

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

2 Comments

  1. Dr. J
    Dr. J October 10, 2018

    Sharing that I closed the SPY trade “other half” when price started sliding this morning below my purchase price.
    ….
    We are down near the first support zone I pointed out near $282. I’m looking to see the reaction of the market down near that level and if I see a reason to jump on a potential long trade, I will do so. Make your own decisions and own them…have a trading plan…but if you are a long term investor, deploying some of your cash back into the market on this dip makes sense. The S&P500 is about 100 points lower today than it was a few weeks ago…it is ON SALE in comparison!!!!

  2. Dr. J
    Dr. J October 9, 2018

    Just sharing that I took a TRADE in the SPY yesterday and already booked profits by buying at 286.50 and selling at 287.50 on half the position. That gives me $1 in room on the other half to ride out any downdraft over the next few days. I’m looking for a SPY target of $289 to $289.50 on the other half before the end of the week. I do not intend to hold this trade past the weekend unless we GAP up over $289 and hold the gap as trade gets underway on any given day. Enjoy the updates and good luck in your investing.

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