S&P 500 'probably going lower,' say chart watchers

The plunging stock market Monday broke a key support level, and chart-watching advisers believe that market action over the next few days will provide critical clues as to whether the sell-off continues. In August, the S&P 500 index tumbled to a low of about 1,120 and held firm at that level until yesterday, when the index closed at 1,099. The next support level is around 1,010 on the S&P 500, or 7% to 8% lower than the large-cap bellwether's current trading level. "The problem I see here is if we get two or three closes below that [1,120] support level," Greg Morris, senior portfolio manager at Stadion Money Management LLC, said in an interview today. A few more closes below 1,120 or so could take the market down to the lows hit last summer, when the S&P 500 bottomed at 1,020 to 1,040 and the Nasdaq Composite Index hit the 2,100 level, he said. Yesterday's sell-off saw more stocks hit new lows than during the last test Sept. 22, Bob Kargenian, founder of TABR Capital Management LLC, said in an interview late yesterday after the close. "So that tells me this is a stronger declining phase than we had Sept. 22, which means we're probably going lower," Mr. Kargenian said. The S&P 500 has a "cluster" of support at the 1,000-1,050 level, he said, which would also be a 50% retracement of the gains made since March 2009. That kind of a correction is typical after a significant rally, Mr. Kargenian added.