SPX: Hesitation at the top, breakout at stake
Updated
The index closed above its previous 2,400 resistance twice in a row, in what could be construed as a positive, breakout formation. However, and as I said in an earlier post (see below), this took place in low volume and therefore requires confirmation. US market futures are looking down today. Should the market slide below 2,400 today (which looks likely), this would endanger the breakout. Further danger if the drop takes place in above-average volume, and/or if the market closes below this level.
Note
The worst of all possible worlds took place yesterday during the session: 1) The market divergence between NDX/SPX was resolved downwards; 2) The S&P500 gapped down, stayed down and closed at the low of the day; 3) All this was done in abnormally high volume (more than twice the average); 4) The VIX established itself some 40% above the 10% low level of 2 days ago. There has been wide anticipation of market consolidation, and this could very well be it. While futures are looking up today, the market would have to go back up some 2% in encouraging volume to repair yesterday's down action - Unlikely in my opinion. Watch the next few days, and particularly the Friday close, for cues on where we go next (my expectation is down). The overall, longer-term up-trend remains unharmed for now.Note
On Friday the index closed exactly below the MA20 resistance after an encouraging 2-day, late week rebound. We are now some 18 points away from the 2,400 resistance and 24 points from the recent historical top. We still need to bridge the gap at 2,396.1, and to reclaim the previous highs, in order to properly resume the short-term ascending trend. In the meantime, caution remains of the essence.Note
The index consolidated and readjusted just enough over the past 10 days to bridge all pending gaps. This was done in small steps and without panic, attesting to the quality of the move and the current strength of the market. We are now back in our breakout mode but in decreasing volume as we get closer to the resistances, and with yet another milestone to achieve: Closing more durably and with meaningful volume above 2,400 / 2,401 / 2,405.8. If this milestone is achieved, the next target becomes 2,448. Until then, caution remains of the essence.Note
All levels were breached to the upside towards the end of last week. Breakout above historical highs is in full swing. We are in un-charted territory, literally. We are yet to see a pickup in volume for another confirmation of the strength of this up-move, if we needed one. Next level up on the S&P = 2,448. Stick to positions in case this rally decides to continue, which is likely. Clearly define exit points on main holdings, if the market decides to consolidate, which is possible.Trade closed: target reached
Ending this thread and starting a new one today on the SPX.
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