The Standard & Poor’s 500 Index must close this week above a level it crossed in September for the first time in four years to avoid further declines, according to a technical analyst at Aurel-BGC.
Investors can only expect an extension of the 12 percent rally since its June 1 low if the gauge breaks out of the current trading range and crosses new resistance lines within the next two weeks, said Gerard Sagnier of Aurel in Paris.
Last week’s 2.2 percent drop brought the gauge little more than six points above 1,422, which the S&P 500 fell below in May 2008 and couldn’t cross on a closing basis until Sept. 6 this year, data compiled by Bloomberg showed. Sagnier considers this level a support for the S&P 500, a point that limits losses on the measure and a breach of which signals a downtrend.
The index rose 11.54 on Monday to end at 1440.13.
“What was a resistance level has become a support,” he said in a telephone interview. “If it falls through that level, it’s not good. It can even lead European markets lower. As we’re expecting a lot of earnings reports, it’s a good time to see if the market holds up.”
Some 84 companies in the S&P 500 release results this week, according to data compiled by Bloomberg.
The next resistance levels for the benchmark measure are 1,435 and then 1,455, he said. Sagnier said he remains neutral on U.S. stocks until the index leaves its current trading range.
U.S. stocks last week had the biggest retreat since June as the International Monetary Fund reduced its global growth forecasts and projections from Advanced Micro Devices Inc. and Alcoa Inc. disappointed investors.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
© Copyright 2014 Bloomberg News. All rights reserved.