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A post-Labor Day wobble aside, stock-market bulls are hanging in there, but much may ride on whether the S&P 500 can maintain important support not far below its current trading level, a technical analyst said Wednesday.
Stocks got off to a “stumbling start” to a holiday-shortened week Tuesday as U.S. investors returned after Labor Day, but weakness hasn’t been enough to “completely upset” the bullish setup, said Andrew Adams, in a note for Saut Strategy.
The 4,450 level in the S&P 500
SPX
“is still the rough ‘line in the sand’ I am using in the near term, and as long as we remain above there I think the odds support us going higher sooner rather than later,” he wrote.
Adams highlighted the level in a tweet late last week:
Adams said Tuesday’s performance, in which gains for megacap tech stocks masked significant weakness elsewhere, wasn’t the sort of reacceleration he had in mind.
The S&P 500
SPX
was down another 0.8% on Wednesday morning, trading near 4,459. The Dow Jones Industrial Average
DJIA
was off around 207 points, or 0.6%. The Nasdaq Composite
COMP
shed 1.1%, on track for a three-day losing streak.
He warned that the longer stocks hover near recent lows, the more likely they are to test them.
Adams wrote:
Still, the song remains the same — as long as dips in the S&P 500 hold above roughly 4450, then I expect an immediate upside resolution is more likely. Below there, and we’re going to have to worry about a retest and potential break of the recent low. And considering we’ve already witnessed what could very well be called a “retest,” I don’t have a lot of confidence in those lows holding once more, meaning the S&P may have a date with that 4200-4300 support zone after all.
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