S & P 500 Levels & Analysis for 3/26/10

After gapping higher and making fresh highs for the year, the market experienced a midday reversal which eliminated the gains and put the market back down to the recent support near 116.60 (also approximate location of 5 DMA).   Whenever this type of action occurs, I am reminded of the phrase “it isn’t the breakout which matters, but the subsequent action” meaning, you have to be able to recognize the fluid nature of the market and realize that breakouts will often fail, good traders will respond more quickly to these events..  The market is now at the uptrend line from the early February low and a break of this trend-line (same location as recent 116.60 support) would likely bring about further weakness to the 115.90 area and the more significant level of potential support is found near 115.10 (Jan highs and recent support).  Short term resistance is once again 117.50 followed by 118.00.  A reason to become a bit more cautious near term is the heavier volume which the market reversed on, this is the second heavier volume downside action in the last 5 days.