S&P 500 exchange traded funds were trying to find their footing in Friday’s volatile action in an effort to recoup at some of this week’s steep losses.
Some technical analysts are looking for an oversold bounce, so it’s important to stake out the key support levels the S&P 500 needs to hold. [Bear Trap or Top in S&P 500 ETFs?]
“This morning the S&P 500 tested the 50% retracement of the July 2010 to April 2011 high. That level, at 1190.7, is struggling. Should it give way totally, the next level to watch is a Fibonacci 61.8% retracement at 1148.3,” said Tarquin Coe at Investors Intelligence in a newsletter Friday. “That level also coincides with the price objective of the head-and-shoulders top … That pattern is now confirmed and in full swing. Selling pressure is strong, so its price target of 1140 should be achieved relatively quickly.” [S&P 500 ETFs Test Support at Pattern ‘Neckline’]
The S&P 500 reversed early losses Friday and jumped above 1210 in afternoon trading. Reuters reported the European Central Bank said it would buy Italian bonds if the country speeds up reform measures to reduce debt. ETFs tracking the index include SPDR S&P 500 ETF (NYSEArca: SPY) and iShares S&P 500 (NYSEArca: IVV).
“Yes conditions are oversold but this looks like one of those rare instances where the market doesn’t care. Such occasions result in equities breaking down fast and those who hang on in the belief that it won’t go any lower, since it is oversold, get pulverized, culminating in mass capitulation a few days later,” said Coe, the technical analyst.
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