Those Are the Breaks by Scott McCormick, CMT
Those are the Breaks
by Scott McCormick, CMT
As of last Friday’s close the SPX definitively broke below the trend lines that have been in place since March of 2009, and July of 2009. Keep in mind that even though the trend lines have been broken, it doesn’t mean that the trend since March 2009 has been reversed. In order to call it reversed a close below 1029 would be necessary. However, a breaking of the trend lines does imply a slowing of the momentum of the bull market advance. It is my opinion that the odds of a reversal have increased now since the SPX has respected an important retracement level at SPX 1144.00 and there are signs of weakness.
Friday’s low, near 1089, represented a 50% retracement of the rally from the November 2009 low to the January 2010 high. Couple this with an oversold 14 day stochastic, and the market may move higher in the short term, but as I indicated in the last paragraph there is a key resistance level now that has held at 1144, and with a slowing of longer term momentum, any bounce may be short lived.
In the short term, over the next week, a move below 1089 would most likely place the SPX at 1075. A move above 1102 may indicate a reversal of last weeks decline, and may move as high as 1113 to 1150. Any movement above 1150 would indicate that the longer term momentum has resumed, and a target of 1220 SPX would be in my crosshairs.
