Mapping the Market: Bruised but not battered, S&P 500 has a chance to aim higher

NEW YORK, Sept 21 (Reuters) - Last week was a shaky one for the S&P 500, but it avoided dropping below levels that would have concerned technical analysts, which should bolster bulls as they consider another go at this year’s record highs.

At one point, the benchmark US stock index fell below the 50-day moving average and was on the verge of breaching the 100-day moving average after the US Federal Reserve raised interest rates and left markets expecting more tightening.

Technical analysts use moving averages to strip out price extremes to provide a clearer view of underlying trends. Falling below – or rising above – moving averages can signal a change in market momentum or direction.

Bulls should, therefore, have been relieved when the S&P 500, which was down as much as 4% from its August peaks, managed to hold above the 100-day average before rising back above the 50-day average.

As long as it remains above there, both averages should act as support, meaning a place that buyers are expected to step in. That said, bulls want to see the benchmark index surpass the September 11 high at 7,677.02 to suggest the downward trend from the August record highs is losing momentum. The next resistance would be in the 7,756 to 7,772 area.

On a thrust above the 7,816.70 August 14 record intraday high, the 8,000 psychological level would become the next objective.

If, however, the S&P 500 falls back below the 50-day average near 7,617, the area around the rising 100-day moving average near 7,520 and Wednesday’s intraday low of 7,507.7 will become crucial support.

Falling below those levels would turn attention on the June-July lows in the 7,237-7,314 area, as well as the rising 200-day moving average, which is now near 7,183. A decline to these levels would put the S&P 500 down around 6% to 8% from its record highs.

What the chart shows:

S&P 500 has recovered from lows near 100-day moving average