Thursday, June 27, 2013, 1:36 PM ET
It takes more than a three-day rally for technicians to say stocks are headed back up.
The S&P 500 has run up 2.6% in three sessions, and was headed for the first three-day win streak in over six weeks. But technicians say the pullback from the May 21 record high close of 1669.16 will remain intact until the index can close back above the widely-watched 50-day moving average. And that won’t be easy.
“The 50-day was support all year, until it broke last week on heavy volume,” so it is now a key resistance level, said Adam Sarhan, founder and chief executive of Sarhan Capital. As the chart below shows, the 50-day moving average comes in today at 1620.23.
The S&P 500 was up 0.6% at 1614 in midday trading Thursday, off an intraday high of 1620.11.
Jonathan Krinsky, chief technical market analyst at Miller Tabak, said the 20-day moving average, which he sees as a short-term trend gauge, is now firmly declining, and also comes in around the 50-day moving average at around 1620.
“Therefore, it should be no coincidence that stock are finding some resistance at [these] levels,” Krinsky said.
If that’s not enough, an uptrend line off the November lows that also broke last week, should add to resistance just above the 50-day moving average, Sarhan said. That trendline extends today to just below 1625.
“If we get and stay above there, odds are that we are headed higher,” Sarhan said.
But until then, the short-term technical bias remains negative.