News Column

What to watch

August 7, 2014

By Adam Shell, @adamshell, USA TODAY



Wall Street chart watchers are drawing a line in the sand: 1900 on the Standard & Poor's 500-stock index.

They say if the broad stock market gauge can stay above that key level -- and psychologically important big, round number -- the market has a better chance of avoiding a more significant decline, such as the dreaded 10% correction.

In Wall Street-speak, 1900 is a level that is likely to serve as a "support," or act as a floor for the market, which has run into some turbulence since hitting a record closing high of 1987.98 on July 24. The benchmark S&P 500 is off 3.9% from its peak after closing down 10.67 points at 1909.57 Thursday.

Robert Sluymer, an analyst at RBC Capital Markets, says that the market's recent drubbing (which has been driven largely by geopolitical risks and fear of coming interest rate hikes in the U.S.) has been overdone and that the market is looking "oversold" in the short term as the S&P 500 edges ever closer to the key 1900 support level.

The market could be setting itself up for a rebound. "Daily momentum indicators have moved from overbought levels in late June back toward oversold levels that often -- and usually -- accompany trading rebounds," Sluymer wrote to clients.

Another reason 1900 must hold is it represents the market's long-term uptrend, which investors don't like to see broken. The 1900 support held up during market dips in March and May.


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Source: USA Today


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