Market Analysis – S&P 500

Not much has changed since the open with solid gains across the board this afternoon.  However, the equity market has begun to fall off its intra-day highs over the past hour. More specifically, around 3PM ET the market was seeing gains of over 3% on all the broader averages.  As of 3:45PM ET, we are up approx. 1.3% to 1.6% on the broader indices. The main driver of the day’s upside remains the increased investor sentiment surrounding the effort being made by Euro-Zone leaders to put together a final plan of action to deal with the region’s debt crisis.

More importantly, it is imperative to keep in mind how much of the recent trading has been on pure technicals – especially on a day like today, as the S&P 500 once again made an attempt to reach the all-important 1,220 level (we hit an intra-day high of 1,195 at 3:15PM ET).  After this run at 1,220 was made, we have seen the market steadily pull back this afternoon in what appears to be a technically-driven sell-off.

Finally, I believe that it is important to note that we have seen a significant amount of short covering in today’s trading session market-wide, especially on the open.

See below for a graphical account of recent trading volatility. The first chart showcases the long-term resistance and support levels for the S&P 500. As detailed in the second chart, current resistance stands at 1,220, while support remains at 1,120. Basically, since the beginning of August, we’ve traded in a 100 point range with violent swings nearly every day.

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