Stock Market Outlook – Key Support Broken

The stock market was pushed lower Friday once again, finishing on it’s lows for the day, week and last 2 & 1/2 months.  We will look at the S&P and and what can be expected going into next week, Feb 1-5.

As we entered the new year the stock market was taken higher on a whimper of an effort.  It drifted higher, but seemed weak intra-day.  Key support was at 1086.  With that now broken and the market closing at 1073 the target for this downward break is 1052-1050.  This also correlates with horizontal support which comes in at 1053 and extends down to 1046.

In order to provide any optimism for a renewed push higher this market will need to get above 1104.  Until that occurs movements up to resistance are selling opportunities.  Prior to that, minor resistance is at 1078, 1084, 1090.  Above 1090 there is a resistance range which extends up to the 1104 level, but keep an eye on 1096 and 1100 which are recent intra-day highs.

Volatility has increased dramatically and therefore there are potentially many important levels which can be used for intra-day and swing trading.  The S&P chart below is somewhat cluttered looking, but can provide guidance on short-term momentum.  The sell off has been swift and resulted in downward trend that is nearly vertical on the hourly chart.   Corrections higher will occur; the Blue Fan extending out of the descending price action gives indication of where corrections are likely to pause.

Intra-day swings have been large and very “trendy” meaning there is often two strong moves, sometimes 3, in a day which can provide short-term trades with excellent opportunities.  Using a simple intra-day trend line has been extremely effective in indicating which side of the market to be on as these intra-day trends occur and reverse.