A ‘massive make-or-break moment’ has arrived for the S&P 500

(MarketWatch) Is the worst of the summer selloff finally behind us? Maybe. 

Stocks have been up for three straight sessions, driven in part by stimulus promises from global governments eager to get ahead of any slowdown. “This is the sugar high that is cushioning the market from continued uncertainty,” says Jasper Lawler, head of research at London Capital Group. 

Indeed. On Tuesday, China lowered its benchmark lending rates to help guide borrowing costs lower for companies as the economy slinks along. But the big event is Friday, when we’ll see if Fed Chairman Jerome Powell can keep the panic at bay in the central bank’s annual gathering at Jackson Hole.

On to our call of the day, which declares the summer stock swoon over, making way for the S&P 500 to revisit all-time highs. It comes from Michael Kramer, founder of Mott Capital Management, who says the index could be set for a “massive make-or-break moment” on Tuesday.

Kramer says the S&P 500 appears to have formed a so-called triple-bottom, a bullish signal for stocks that have been falling. In that instance, a stock or index will fall to a specific level where buyers will come in three times, stopping it from declining further. In the most recent case for the S&P 500, that support level was at 2,825.

The index closed at 2,923.65 on Monday after tapping a high of 2,931. The S&P 500 set an all-time record close of 3,025.86 on July 26. 

But in order for those highs to be revisited, Kramer says the S&P still needs to rise above resistance—a price level where sellers step in and stop it from going higher—at 2,935. The index has been stopped at that level a few times, but he thinks this time the S&P can push past it.

“It is a bold call, I know. So that is why failure at 2,935 would be a terrible sign, and I would be anxious that support at 2,825 on the next move lower would not hold, and result in a retest of the June lows,” he says.


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