S&P 500 makes run at key 2000 milestone

After the U.S. stock market’s big bounce off of the August lows and subsequent rally of nearly 7%, Wall Street has its eyes on the 2000 level on the broad Standard & Poor’s 500 stock index.

After hitting an intraday low of 1867.01 on Aug. 24 — the same day the Dow Jones industrial average briefly plunged more than 1,000 points — the S&P 500 has regained the key 1900 level and now is making a run at 2000.

The S&P 500 closed down 7 points to 1980 on Tuesday, ending its five-session winning streak. And in pre-market trading Tuesday, about three hours before the opening bell on Wall Street, the large-company stock index was up nearly 8 points.

The 2000 level is viewed as key, as Wall Street chart watchers say that level now serves as a ceiling — or “overhead resistance” — for the S&P 500. A breakout above 2000 would signal the uptrend is intact.

Bruce Bittles, chief investment strategist at R.W. Baird, says another piece of the “bottoming process puzzle fell into place Monday” when the S&P 500 closed above 1970, which was the first level of resistance. For now, the big-cap index is “lodged in the center” of the 1970 to 1990 resistance area, he says.

But “further confirmation that the trend and momentum have shifted to the upside would come from a breakout above 2000 on the S&P 500 accompanied by another strong volume session,” Bittles wrote Tuesday.

But, Bittles adds, given that stocks are “slightly overbought on a short-term basis and with earnings season ahead, it would not be surprising if the market settled into a consolidation phase before attempting another run.”

Robert Sluymer, an analyst at RBC Capital Markets, says the S&P could take time to take out 2000.

After yesterday's mild decline, Sluymer told clients: "The S&P 500 is showing evidence of pausing and stalling at first resistance at 1990 - 2000."

Still, Sluymer believes the market is in the process of bottoming.

"While a near-term pause is likely taking hold, intermediate-term indicators continue to show evidence of bottoming, which suggests that near-term pullbacks should be shallow," Sluymer predicts.