For the S&P index, 1,400 has become a ceiling

The Standard & Poor’s 500 index has been a disappointment to millions of buy-and-hold investors this decade. Now it’s disappointing chart-watchers who were hoping to see the index cross the 1,400 level in the last few days, which would have helped underpin the argument for a sustained market turnaround.

For the bullish case, "We believe a breach of 1,400 for the S&P, preferably on good volume is the key," said Steve Todd, who writes the Todd Market Forecast from Crestline, Calif.

The 1,400 mark has been a ceiling for the S&P since mid-January. After diving late that month the index rallied to close at 1,395.42 on Feb. 1 before pulling back again.

A second assault in late February took the S&P to 1,381.29 on Feb. 26 before another wave of selling kicked in.

The latest attempt to breach 1,400 came on Friday, when the index closed at 1,390.30 after trading as high as 1,395.90. But after a modest decline on Monday stocks are getting hammered again today. The S&P was at 1,372 around 10:30 a.m. PDT, as crude oil prices jumped above $119 a barrel for the first time.

Do these apparent ceilings really matter? Long-term investors tend to pay them no mind, for good reason. But in the short run a ceiling can become self-fulfilling as more traders pay attention and sell as the market approaches the perceived barrier.

As Paul Hickey, a principal at market research firm Bespoke Investment Group, puts it: "We’re watching the number because other people are watching it."

Posted April 22, 2008