After the S&P 500 broke below the 1950 level, price had a fresh round of selling pressure take the index down to the 1925 support level. With yesterday’s biggest rally being erased, slowing growth concerns for Europe over the next few days may drive stocks to continue with this current pullback.
With volatility rising, a daily close below $1919 (10% retracement of the October 2011 low to 2014 high) could signal the next major leg down towards the 23.6% Fibonacci retracement at $1791. With price poised to close below the 100-day SMA, immediate downside targets include the $1900 level which is also a couple points below the 200-day SMA.
Value investors will be buying on major dips, so the move lower maybe very choppy.
The trade: Sell S&P 500 at 1930 with a stop loss at 1975 and a take profit at 1840 The Risk/Reward Ratio is 1: 2
Edward J. Moya
WorldWideMarkets Online Trading