Why stock market bulls are cheering the S&P 500's close above 4,231 - MarketWatch

The S&P 500 index on Friday finished above a chart level that delivered a dose of encouragement to stock-market bulls arguing that the U.S.

“Since 1950 there has never been a bear market rally that exceeded the 50% retracement and then gone on to make new cycle lows,” said Jonathan Krinsky, chief market technician at BTIG, in a note earlier this month.

Krinsky, in a Thursday update, had noted that an intraday breach of the level doesn’t cut it, but had cautioned that a close above 4,231 would still leave him cautious about the near-term outlook.

“Because the retracement is based on a closing basis, we would want to see a close above 4,231 to trigger that signal.

Back on Wall Street, technical analysts see key retracement targets for a rally from a significant low to a significant peak at 38.2%, 50% and 61.8%, while retracements of 23.6% and 76.4% are seen as secondary targets.

The push above the 50% retracement level during Thursday’s recession may have contributed to a round of selling itself, said Jeff deGraaf, founder of Renaissance Macro Research, in a Friday note.

He observed that the retracement corresponded to a 65-day high for the S&P 500, offering another indication of an improving trend in a bear market as it represents the highest level of the last rolling quarter.

“That level coincidentally corresponded with the 50% retracement level of the bear market,” he wrote.