S&P500 sees support with rocky quarters ahead

The S&P500 (SPX) continues to defy overvaluation concerns, shedding only -5.7 per cent or so from its all-time high near 4,546 points, and hardly even meeting the criteria of a market correction (generally agreed upon to be a decline between -10 per cent to -20 per cent).

The recent selloff has also had the welcome effect of bringing down the SPX's forward price earnings (PE) ratio to around 21x. While still above the SPX's 10-year average PE of around 16.5x, it is a departure from earlier in the year when the PE was over 23x.

Looking at the chart, the previous bull market support line now appears to be a point of resistance for the SPX over the past few weeks and may continue to be a resistance band (approximately 4,440 to 4,520) for investors to monitor going into the earnings season.