Today was one of those odd days – nothing but crappy news out this morning and yet the market managed to finish in the green after a day-long climb. Lol. The morning drop was predictable, but what about the rebound? My theory – 1040.
All year, 1040 +- has been one of those mental pivot points for technical traders on the SPX. Today was no exception. Excluding the massive drop to 1010 back in early July, the range we hit today has created quite a springboard for the next move up. If this reversal is for real, we could see great moves up to the 1115 range.
Right now, the SPX looks just like it did in February. MACD, RSI14 and Full Sto were all at similar levels. Volume is lower now, but that is to be expected. We all know what happened during the February reversal. It ran for 3 months. The difference, however, was macro. The market was more optimistic and consumers assumed that jobs were coming back. Today, unemployment is still horrible and consumers are becoming less and less confident. To make matters worse, every economic report lately has completely sucked. So, even though the charts look encouraging, don’t get suckered into a head-fake rally. Let’s take our time swinging long and reduce exposure.
Want another optimistic chart view? Inverse head and shoulders. This formation says we should go back up now.
However, there are a few obstacles that we must overcome before fantasizing of a bull run.
1. News – don’t forget about the economic calendar over the next two days. We have jobs and GDP numbers coming out over the next 48 hours that could destroy everything I wrote above and send the markets back down to July 1 lows.
2. Confidence – Don’t forget that the market is very nervous and there will likely be plenty of profit taking with any bounce.
See you in the boom factory tomorrow. Is it time for a bull ride?