S&P Morning note from the firm

As seen in the attached research note the S&P 500 ran into a significant downtrend line near 950 and has subsequently turned down. This area also represented the January 2009 peak before the index legged down to its’ lows. Given the S&P 500 had to rally almost 44 % before it hit this down trend it is only logical the index would stall here.

We would expect sideways and downward price movement with periodic minor rallies throughout the remainder of the summer, however we think for a while 950 will be the high price on the index, thus more defensive postures (ie. such as buying into corrections and selling the recovery bounces) and strategic trading is likely to make more sense than buying and being patient.

Additionally and as we mentioned yesterday as we enter the mid to latter summer seasonality trends also tend to become less bullish as the summer rally gets replaced by the summer doldrums. So the preponderance of evidence suggests continued softening is likely to occur for a while.

Only taking out the aforementioned resistance/downtrend line near 950 would change the picture from cautious to bullish.




posted by Peter Greene