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

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.

Click here for a detailed technical analysis chart. 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

Falling below 7,507.7 opens the way to the 7,237-7,314 area as well as the rising ⁠200-day moving average, which is now near 7,183. A thrust above 7,677.02 can refocus on the record highs around 7,800.

(Mapping the Market is a ⁠daily column written by Reuters journalists. ⁠The commentary is based on a technical analysis of financial charts, which helps assess the likelihood of future price moves but does not guarantee the outcome. The column does not constitute investment advice or ‌trading recommendations. ) (Terence Gabriel ‌is a Reuters market analyst. The views expressed are his own. Editing ​by Burton Frierson and xxxx)