Watch This S&P 500 Level in September

As markets look to finish a difficult month of August trading, what should investors expect from September? 

Action Alerts PLUS co-portfolio manager Bob Lang broke down the trading levels to watch in the S&P 500 in the video above. 

FULL VIDEO TRANSCRIPT BELOW: 

So yesterday, we saw the S&P 500 break below 4,000 for the first time in a couple of days, and it stayed below there, and we’re currently trading a little bit below there right now. We do see a little bit of a modest rally happening so far today, but still, with that break of 4,000, we do have some lower targets in place right now. We talked about this the other day. That 3,950 on the S&P 500 is a good target to head down towards.

If we can’t recover past that, 4,000 level, and even below that, about 3,900 on the S&P 500 could be there. The one headwind for the bears, if you want to call it that, is the fact that the oscillators are extremely oversold right now, and we have a minus 300 reading on the NASDAQ, minus 280 reading on the New York Stock Exchange oscillator. And we often see rallies from those low levels of the oscillator which could happen right out of the blue within a couple of days.

So that’s the one headwind that the bears are looking at. But still, the trend is down. The bear market is still alive right now, and we still have to play by the bear playbook going forward.

So again, this big rally that we had up to 4,325, and if we get down to 3,900, that would be about a 50% retracement level from the highs at 4,325, which was when we tagged that 200 day moving average down to the lows in June at 3,640. So it’s roughly 3,900 to 3,920. So if we get down there and we bounce off of that level and we’re oversold, that would be pretty significant. It would be a good sign for the bulls. But for right now, the trend is still down, and we have to play it that way.

From a deeply oversold condition, though, could we bounce a little bit further up towards up towards 4,070, maybe 4,100? Absolutely. But the damage done to the markets last Friday is very severe, and we followed through on Monday and Tuesday. So again, it’s time to use caution. It always is time to use caution, but be more aware of the fact that some downside levels are– downside targets are there.

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