S&P Levels & Note from the firm

As seen in the attached report on the S&P 500, the index is stalling again and now turning down from the 950 area. Given the large run up off the lows this should not be a surprise to anyone to see the market starting to stall, pause or retrace. However just as the market bottomed and rallied in the face of bad news now we are getting the exact opposite where the news flow is improving or good and the market is selling off. It is this action of selling off on good or less than bad news that troubles us more than anything.

Early warnings of the loss of momentum can be traced back to early May when the S&P 500 broke below two faster accelerating trend lines and then subsequently failed to climb back above them. To keep things in context Monday’s action looks like a small blip so far, however we have to be aware that the S&P 500 has now failed on numerous attempts to get back above 950 and is now testing a less accelerated trend line while its RSI momentum diverges from price. Any movement below that aforementioned trend line level would suggest that market may want to test the next level of support below the market near 875.

At this point the low hanging fruit and easy money has been made and traders/investors need to be more selective while the market corrects the excesses of the run off the lows. It doesn’t mean money can’t be made on the long side or we have to have a full retest, it just means being patient and buying the next corrective wave may make more sense than chasing. To get a renewed bullish outlook 950 is going to need to be taking out on a solid upside breadth day (ie. good advance/decline and up to down volume ratios)




posted by Peter Greene