Indexes Are Fighting at a Key Level

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Stocks ripped hard to start the year, but now comes the hard work.

The S&P 500 is back to a potentially key price area between 2600 and 2650. That’s where it bounced in October and November, but then failed to hold in early December. Some chart watchers may now wonder if the old support zone will become resistance.

The index is also trying to push back above its 50-day moving average. However that trend line is falling sharply, which could make some momentum traders look for sellers to reemerge.

The other two big indexes, the Nasdaq-100 and Dow Jones Industrial Average, are battling similar levels. All three have had four straight positive weeks. Oil’s in a similar boat.

S&P 500 index with 50-day moving average and 50% retracement line.

It’s a strange time for the market overall as investors try to process a confusing mix of news. On one hand, we’ve entered the thick of earnings season and most of the numbers have been positive so far. Bank lending has been surprisingly profitable. Ditto for the results from other big names like United Technologies (UTX), Procter & Gamble (PG) and Comcast (CMCSA).

Economic data has also remained mostly positive and the Federal Reserve has calmed nerves by turning more dovish.

Meanwhile, investors are staring into a cloud of uncertainty because of the government shutdown and trade anxieties with China. Everyone seems to think these issues are big deals, but they haven’t hurt business in a significant way yet. Will there be a delayed reaction, or will the other shoe never drop?

In conclusion, investors can find reasons for optimism or caution following the market’s strong rally of late. However the outlook on the charts is less clear as investors wait for greater clarity on the bigger issues.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.