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1,160 is key level for S&P 500

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The major indexes are in the red as the session progresses, but bulls seem to be standing their ground. Earlier today we witnessed the CBOE Internet Index (INX.X) lead sector decliners as that index was down more than 3% to 129.58, but the past hour has seen this index start to firm up a bit and par some losses with a decline of 2.72%.

Software stocks as represented by the GSTI Software Index (GSO.X) are trading as the number 2 sector loser today as the GSO.X trades down 2.2%. Earlier today we saw this index trade below the 173 level, which violated a relative low set back on 08/10/01. Much like the CBOE Internet Index (INX.X) this group of stocks has found some short-term support, but today's break of last week's low should have traders defensive in the group.

From the broader market perspective, one level a trader/investor should be monitoring over the next several sessions to the downside in the S&P 500 is the 1,160 level. For the most part, the SPX has formidable resistance at the 1,230 level and support near 1,170. A trade at 1,160 on the $10 box point and figure chart could have the current bearish price objective of 1,130 coming into play.

S&P 500 Index Chart - $10 box

I've extended the old "bearish resistance" trend on the above chart to give traders the view of a downward channel on the SPX that could come into play on a trade at 1,160. Some time ago, we pointed out that the current bearish price objective of 1,130 correlates with the apex of the bullish triangle that unfolded back in April.

Bearish traders that are currently implementing shorts/puts in their portfolio and account management can be targeting the 1,130 level. Bullish traders that are currently implementing some covered call strategies or protective put strategies should also be able to use that 1,130 level as a way of assessing risk in their holdings.

Jeff Bailey
Senior Market Technician

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