Marketwatch technician sets S&P breakout levels

"Resistance on the S&P 500 chart is strong and formidable," notes options expert David Nassar, who believes a close above 1505 is needed to confirm an upside breakout. (The index closed today at 1471). That, he says, would be the final determination that the bottom has been made. Conversely, he notes, as long as that upside breakout does not occur, the picture remains more bearish than bullish.

In The Marketwatch Options Trader, the analyst explains, "The last rally stalled out at the 1480 level, but the 1490 level has been the more common failure point. Either way, that area is going to be tough to break through. The one time that it was penetrated on a closing basis was in early August, and it fell back after just one day's close."

For the technically-inclined, he notes that the equity-only put-call ratios have improved this week, and the standard ratio has officially given a buy signal. However, he counters, "Market breadth has been all over the place and we now have new breadth sell signals in place."

Finally, he notes that the volatility indexes continue to remain at fairly high levels, which he says can't be considered too bullish. Further, he adds, "Now they rate as neutral at best -- and could easily be interpreted as bearish if they continue to rise."

The advisor concludes, "We would not grade the S&P 500 chart as bullish unless and until it can close above 1505 (or perhaps a two-day close above 1490 would be sufficient). But something on that order is needed. Lacking that, the chart is neutral to bearish."

Each day, Steven Halpern's TheStockAdvisors.com features the latest stock picks and investment ideas from the nation's leading financial newsletter advisors.