Bull and Bear Tug of War

Below is a chart of the S&P 500 at noon on March 4th. We have currently retraced better than half of the decline from the January high. I have included support and resistance lines on the chart. Resistance is set at 1125 and support at 1044. A close above 1125 resistance would be a clear signal that the trend to the upside would resume, in which case I would add to long positions. On the other hand, a close below support 1044 would indicate that an intermediate downtrend would then be re-established and a more cautious approach should be taken.

(Click on chart to enlarge it for easier viewing)

What is Support and Resistance ?


Support


A support level is a price level where the price tends to find support as it is going down. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue dropping until it finds another support level.

Resistance

A resistance level is the opposite of a support level. It is where the price tends to find resistance as it is going up. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely that it will continue rising until it finds another resistance level.

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