S&P and Nasdaq slip under prior highs as sellers retake control

Earlier this week, both the S&P and the Nasdaq Composite reached new all-time highs. Buyers had their chance to build on those breakouts, but the follow-through did not arrive. Instead, the two benchmarks have slipped back beneath their prior high swing areas, giving sellers the upper hand in the near term.

Those prior highs are again the levels that define risk. Remain below them and the lean is toward more downside. Move back above and hold, and the pressure from the failed breakout starts to fade.

The pullbacks have also brought the 100-hour moving averages into play. They give buyers a place to lean, but support must hold and a recovery must take shape.

• S&P 500: The index has dropped back under its previous high swing area from 7,771 to 7,815. That zone is now overhead resistance and the risk level for sellers. Staying under 7,771 leaves sellers in the stronger position. A return into the zone would ease some pressure, while a sustained move above 7,815 would reinforce the case for a recovery.

  To the downside, the 100-hour moving average at 7,719.30 is the first support test. If that level holds, buyers get a chance to push back toward the old highs. A momentum break below it would put the 200-hour moving average near 7,691 in view as the next target.

• Nasdaq Composite: The index has pulled back under its prior high swing zone near 27,190 to 27,288.79. The upper boundary at 27,288.79 now serves as a nearby risk level for sellers. While the index stays below it, the failed breakout remains in play.

  The decline has put the 100-hour moving average near 27,115 in focus. Buyers must defend that level to slow the slide and start a recovery. A sustained break below it would open the path toward the 200-hour moving average near 26,701.

A lesson for traders

A record-high breakout is a bullish signal, but buyers must keep price above the breakout zone. Once price falls back beneath it, the technical message shifts.

The former highs help sellers set and contain their risk. Buyers can use the 100-hour moving averages as a level to lean on. If those averages hold, buyers will get another opportunity. If they break, sellers gain another reason to push lower.