The benchmark S&P 500 Index is putting in a mixed performance early Monday. Traders are focusing on the key retracement zone that is controlling its near-term direction.
The main range is 7620.90 to 7237.85. The index is currently testing its retracement zone at 7429.38 to 7474.57. In my opinion, trader reaction to this zone will determine the next major move in the market.
Earlier this month, liquidation selling plunged the market from 7620.90 to 7237.85. But the rally back to 7577.92 gave the bulls hope for a rally to a new all-time high. Instead, a potentially bearish secondary lower top formed at 7577.92, suggesting that short-sellers were trying to block the move to the new high.
That move shifted the focus to the retracement zone at 7429.38 to 7474.57. A sustained move over 7474.57 will indicate the presence of buyers and a sustained move under 7429.38 will indicate that the selling pressure is getting stronger.
If buyers win the battle at 7474.57 then look for the rally to extend into 7577.92. A breakout over this minor top could trigger a surge into 7620.90 and beyond.
If sellers take over and drive the market under 7429.38 then look for the selling to possibly extend into the 50-day moving average at 7328.60. We could see a technical bounce on the first test of the 50-day MA.