Need to Know: Here Are the Critical Levels Stocks Must Hit and Hold

The market - what can you say but, "So far, so good?"

After major benchmarks made all-time highs last fall and then fell out of bed from October through their Christmas crash, the big indexes have bounced back like bulls through a china shop.

But - and this is a big "but" - we're not all the way back.

In fact, stocks have been churning sideways since making their epic comeback, which has a lot of analysts worrying they've shot up too far too fast.

Whether or not the major market benchmarks can break out of their churn, make higher all-time highs, and support another leg up in the 10-year old bull market all depends on one thing: getting past resistance levels.

The sideways slipstream also makes stocks vulnerable to profit-taking and backing up.

Whether or not the major market indexes are safe from falling back out of bed again depends on them holding important support levels.

Here are the levels we need to watch. And make no mistake, we're not the only ones watching...

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All Wall Street Has Their Eyes on These

The Dow Jones Industrial Average hit its all-time high mark of 26,951 back in October 2018... before a stomach-churning fall of 5,239 points, or 19.4% to 21,712 at Christmastime.

Some present that was.

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As hair-raising as that was, stocks managed to avoid 20% losses - that's the technical level where a bull market is considered broken, and stocks can be said to be in a bear market. That helped the venerable index.

Inspired by some post-correction comments by the Federal Reserve about "not raising rates" any higher, and that it's "watching financial markets," bargain hunters started buying. That brought in the buy-the-dip crowd, then mutual funds and index exchange-traded fund (ETF) buyers. The cumulative effect was the Dow roaring right back up.

As of this morning, Monday, April 1, the Dow is up 19.99% from its December 2018 lows. It's a little less than 4% from making new all-time highs; it's punched up through two resistance levels, most recently at 26,091.

If we close above there - and it seems entirely likely that we could - it should be an easy walk in the park to the old highs.

Speaking to the downside, the Dow's got to hold support at 25,300. That's not major support, but a good test of the recent move up.

Below there, the Dow's got support at 25,000.

And below that, it's 24,100.

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If we can't hold that 24,100 level, look out below - something's really wrong.

The story's very similar for the broader S&P 500 big-cap index.

Its all-time high, made last October, is 2,940.

After falling 594 points, or 20.2% through December, the S&P 500 shot back up to 2855.64, nearly 21.5%.

That puts the index less than 3.8% from making new all-time highs.

Trading on Friday and today has broken through two key resistance levels, most recently at 2,880, and we are looking at bright blue skies from here.

On the downside, there's support at 2,809 and another level of support at 2,783.

If the S&P 500 can't hold major support at 2,581, something's seriously wrong, and the selling will be seriously ugly.

Last, but certainly not least, the Nasdaq Composite. The tech-heavy index made its all-time highs back in September 2018, at 8,133.

It had the hardest fall from grace.

In fact, the Nasdaq actually led the downfall, slipping before the other benchmarks and dragging them down in its wake.

Through December lows, the Nasdaq fell a frightening 1,943 points, or almost 24%.

The index has bounced back nearly 25%, based on this morning's read of 7,791.28.

Still, the tech-heavy former market pace horse is a touch over 4.2% from its old highs. That's the longest reach of any of the benchmark indexes, and it's something to watch, for sure.

First resistance for the Nasdaq is 7,780. Then it's going to have to get above 7,853. And if it's going to make a run at new all-time highs, it's got to get through resistance at 7,932.

If the tech sector starts to slip again, the Composite might hold support at 7,588. If that minor support folds, then it's got to hold 6,900, which is major support.

Below there, the benchmark's got a little support at 6,877. Below that is trouble, for sure.

Keep an eye on all these levels - not because I said to, but because they're what all institutional traders are watching; it's where the money is.

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About the Author

Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.

The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.

Shah founded a second hedge fund in 1999, which he ran until 2003.

Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.

Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.

Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.

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