We examine the consistent support levels offered by the S&P 500 Index so far this year.
The S&P 500 Index SPX closed lower for the second consecutive week, having fallen about 2% from its all-time closing high of 5,254 on March 28 to around 5,150 at the time of this writing Friday (4/12). This has not even been enough of a decline to cause the default chart of the index to reverse down into a column of Os, which would come with a potential move south of 5,100. While losses are never ideal, seeing the broad market benchmark consolidate is a perfectly normal occurrence, and can often be healthy for future growth. However, seeing lower prices naturally brings concerns around how long the declines will persist. Today, we will examine notable support levels for SPX to keep on the radar as reference points, hopefully alleviating fears of eminent weakness on the horizon.
The current technical picture for the S&P 500 has seen consistent improvement, with the default chart giving six consecutive buy signals. That movement started at the beginning of November last year, when we saw the sharp reversal from the October correction led SPX to continue higher in a single column of 32 Xs, notching one of the largest single columns we have ever seen. When the market was on such a significant stem, we did not have any recognizable support levels to look toward if things had turned around. Luckily that was not necessary, as the consistent demand continued throughout the first quarter of 2024. The more recent action has left a healthier chart, with recognizable support levels that have stemmed from brief pullbacks before further appreciation. Initial support on the default chart for SPX sits at 4,940, which would be a decline of about 6% from the all-time high at 5,250. Further support from there can be seen at 4,860, which would be a decline of about 7.5%. We have not seen a 5% pullback in SPX since September 21, 2023, which is 204 calendar days. This is almost twice as long as the average days between 5% pullbacks historically since 1928. Furthermore, the typical 5% pullback sees a decline of about 2.74%, on average, after the 5% threshold is breached. So, if we did see further consolidation down to the initial support levels, that would be consistent with normal market pullbacks over the last century.
Further support from those levels can be seen in the 4,720 to 4,700 level, which would be about 10% off the March all-time highs. We are certainly not saying that we are expecting the S&P 500 to trade down to that threshold in the near-future, or even that we are going to trade down to the initial support levels mentioned above. Instead, we are merely pointing out that the consistent support offered provides a sounder technical backdrop for the improvement so far this year.
