Introduction
The stock market has again returned, and quickly, to testing just how important S&P 1,080 is as a technical support level. I believe the fullness of time will show it was not all that important, and perhaps not much time at that!
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Okay, let's begin with a walk down "S&P 1,080" memory lane, with excerpts from work that spans the last week:
* "Stocks: S&P 1,080, Part I" (Tuesday, 7/27, early AM):
"For the time being at least, the S&P 500 has established the 1,080 area as an important technical support level. I don't think it will hold too long [and] I don't know how legitimately important it is, but if people think it's important, then it becomes important...Yesterday's general behavior reinforced the notion. The S&P had a range of 1,078.85 to 1,089.82, closing at 1,084.07 ... The index traded at or a bit below 1,080 on and off during the session, but it seemed to find a decent bid generally around 1,080. Therefore, for the time being, this becomes a key number."
* "Stocks: S&P 1,080, Part II (Friday, 7/30):
"As circumstances have evolved over the last few days, S&P 1,080, give or take, did indeed turn out to be an important number...But this respite from the market's recent slide may be nearing an end.
"...At yesterday's high [7/29 high was 1,104], the S&P 500 stood almost 25 points or 2.3% above Tuesday's low. On a close-to-close basis (from the recent low close of 1,084.07), the S&P is up more than 16 points or 1.5%. Almost 11 points of this gain came on Tuesday; the balance came Wednesday and yesterday combined...I suspect the recent rally represents a prototypical bounce in a market that had become heavily short-term oversold...It is unlikely prices will trend higher for much longer. Using the S&P 500 as a proxy, my guess would be maybe another 1% to the upside [which at the time projected to about 1,111], and perhaps not even that."
* Finally, from the very wee hours of yesterday morning (8/5, "Stocks: S&P 1,080, Part III"):
"Check back later today; I'll have something more extensive in the way of views on this. But I wanted to get this brief piece up [on the website] now to let people know that I think there's a chance -- a pretty good one, in fact -- that Monday's S&P 500 intraday high of 1,108+, close of almost 1,107, may have been it. A finish today (8/5) solidly below yesterday's close of 1,098.63 would likely seal the deal!"
(NOTE: This missive is the "something more extensive in the way of views" -- a bit later than I originally anticipated getting it out.)
Okay, now let's recap the above using the following table, in the same chronological order.
S&P 500
Day/Date Close High Low VIX
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Mo 07/26 1084.07 1089.82 1078.85 17.30
Tu 07/27 1094.83 1096.61 1084.07 16.55
We 07/28 1095.42 1098.85 1082.22 16.15
Th 07/29 1100.43 1103.72 1095.42 15.68
Fr 07/30 1101.72 1103.72 1097.22 15.32
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Mo 08/02 1106.62 1108.58 1097.23 15.37
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Tu 08/03 1099.69 1106.62 1099.27 16.03
We 08/04 1098.63 1102.44 1092.47 16.21
Th 08/05 1080.70 1098.73 1080.09 18.32
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A repeat of a key thought from yesterday morning's wee hours, to wit: "A finish today (8/5) solidly below yesterday's close of 1,098.63 would likely seal the deal!"
The above numbers bear grim witness to a finish yesterday solidly below Wednesday's 1,098.63 close. So ... now it is back, rather quickly, to seeing just how important a support level S&P 1,080 really is. But I reiterate a recently stated view: don't believe it is all that important, or that will hold too much longer.
Today's employment report might be a factor in determining how much longer 1,080 holds, as might today's behavior of the price of crude oil. On the latter front, I go back to a view expressed a few weeks ago, when oil had throttled back to about $37. At that time, I opined that the $37 area was probably about the low, and that there was a solid chance all the bravado coming from Riyadh was something of a bluff -- that the Saudis were not capable of bumping up their own production to levels sufficient to halt a probable continuing price rise.
If I'm wrong and they can, someone has yet to tell or to convince the folks in Rotterdam or in the pits at the New York Merc!
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Stock-Market Damage Update
My seven-measure tracking group had a uniformly ugly day yesterday, registering respective average and median declines of 1.7% and 1.6%. All seven components fell. Losses ran in a range of 1.4% for the NYSE Composite, to 1.9% for the NASDAQ 100 and the Russell 2000.
And here is what the situation looked like for the group through yesterday for the year to date as well from respective 2004 highs. Please also note how old the 2004 highs have now become.
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SELECTED STOCK-MARKET MEASURES (Returns Exclude
Dividends and Are Ranked in Year-To-Date Order)
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% Change To
08/05 12/31 2004 Highs 08/05 From:
2004 2003 ----------- ---------------
Close Close Close Date 12/31 '04 Highs
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NYSE Comp. 6295 6440 6780 03/05 -2.3 -7.2
S&P 500 1081 1112 1158 02/11 -2.8 -6.6
Russ. 2000 532 557 606 04/05 -4.5 -12.2
DJIA 9963 10454 10738 02/11 -4.7 -7.2
Wil. 5000 10472 10800 11314 03/05 -5.0 -7.4
Value Line 342 363 387 04/05 -5.8 -11.6
NASDAQ 100 1353 1468 1554 01/26 -7.8 -12.9
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Average -4.7 -9.3
Median -4.7 -7.4
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As to relationships with 200-day moving averages, I continue to think the overall current down-leg could take the three proxies I use for monitoring purposes to minus 5% to minus 10% from yesterday's values before a decent, somewhat sustainable rally sets in.
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200-DAY MOVING-AVERAGE VIOLATIONS --
VALUES PROJECTED FROM CLOSE ON 08/05/04
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% Decl/Gain From
MA Violation/ 08/05 Close At
Resulting Price Violation Of:
08/05 --------------- ----------------
Measure Close 0% 5% 10% 0% 5% 10%
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DJIA 9963 10236 9724 9212 +3.0 -2.4 -7.5
NAZ Comp. 1822 1981 1882 1783 +8.7 +3.3 -2.1
S&P 500 1081 1108 1053 997 +2.5 -2.6 -7.8
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