TECHNICAL SIGNS POINT TO …
Interesting technical characteristics on the SPX charts. As we have pointed out for a while, the technicals point to resistance in the SPX 1420-1440 area. That is defined by the 200-day SMA as well as previous support that turned to resistance on the break toward sub SPX 1300. Counter to that is the new bullish bottoming pattern of a reverse head-and-shoulders that has developed that points to an objective of SPX 1500-1510.
The index is just a sum of its parts and when you examine the parts, one sees the number of stocks above the 200-day SMA now at 46% from the low of 14%. This is a strong internal improvement.
What to do? I would say there will be a fight at the SPX 1420-1440 level for control of the market. My thesis is that new lows are not required to satisfy any technical conditions and have stated that the market should be neutral to higher through the summer.
If you are trading, taking part profits on the bullish ETF trade would make sense at the SPX 1420-1440 level. (A Proshares trade (SSO) would have returned almost 15% in a couple of months).We now have a 10% cushion to play with that keeps the market on a positive trend. I would think that the SPX 1350 level is sufficient on pullbacks.
Much of the market gains are built on this being a normal timed recession, and we are halfway thorugh, and the market looks forward 6-9 months so therefore we start to discount the recovery now. The Fed is pouring money into the system and inflation is a problem. I think the second half of the year still brings some negative surprises. Trade accordingly!
3 years ago • Notes