Tomorrow and the Next
Wednesday, the market continued its trend higher, with the S&P notching a 5 point gain to 1282. Intraday, the S&P bumped up against solid resistance at the 1291 level. This level coincides with a 38.2% retracement from the 1440 high to the 1200 low. It also happened to line up the 200 moving average on the SPY 60-minute chart.
Thursday, watch for a pullback over the next couple of days. One last spurt through the 1291 level is possible, perhaps as high as 1294. But this market is overbought and is ready to pullback. The financials appear to be overbought and the XLF is bumping against resistance at 22.50. This level was support in mid-June, then it was taken out and served as resistance on June 25. This level coincides perfectly with the 50 moving average on a daily chart.
SPX Support Levels
1263 ~ old support that is now resistance
1226 ~ old support
1200 ~ intraday bottom put last week
SPX Resistance Levels
1291/92 ~ old support that is now resistance, also 38.2% retracement
Over the Next Week or Two
The S&P is in the midst of a bear market rally. Such rallies tend to be strong and short, which is certainly the case so far. This rally should have legs to the 50 moving average, but needs to consolidate. Without an adaquate pause, the rally is likely to fail.
After That
The S&P is in a bear market, and all rallies must be viewed as counter-trend moves until we see confirmation that the bull is back. The long-term outlook is dependent on the price of oil and developments in the credit markets. High energy prices are probably here to stay and it will take time for our economy to adjust. The financials and housing sectors are not out of the woods. The financials will not bottom until major bank failures come to fruition.
The Market Outlook is updated as the charts fill out and provide more clarity.
