The market action this week favored bulls, with SPX taking out resistance at 2743, a level that had rebuffed rally attempts in previous weeks. Strong economic data kept bidders involved throughout the week and the index closed near the top of the week's range, which in turn bodes well for next week.
The next resistance to watch is at 2800-2802, a zone derived from the 78.6% retracement of the correction and the previous swing highs from late February and mid March. The market failed twice at this level, so a decisive break above it would suggest a retest of the highs, or perhaps beyond. In that scenario, the upside target would be 2955-2965, a range based on the 127.2% and 161.8% extensions of previous swings.
If we fail to overcome resistance, a test of the aforementioned 2743 seems likely and should indicate the conviction of bulls' resolve going forward. A worse case scenario would be to fall short of the previous high of 2801.90, thereby forming a lower high in what could become a prolonged correction or sideways action.
I did trim several long positions on Friday to lock in gains, and I also put on some hedges in case weekend news puts a damper on next week's action. With the G7 summit, NoKo, and a litany of other geopolitical concerns clouding the view, coupled with a FedRes meeting and a slew of economic data, too, it seemed prudent to reduce risk and hedge against potential negative catalysts.
All that said, it seems the general trend is now decidedly bullish, but I still want additional confirmation to invalidate a potential bull trap before signaling an all-clear. But, until the tape says otherwise, stay long and buy weakness!
The next resistance to watch is at 2800-2802, a zone derived from the 78.6% retracement of the correction and the previous swing highs from late February and mid March. The market failed twice at this level, so a decisive break above it would suggest a retest of the highs, or perhaps beyond. In that scenario, the upside target would be 2955-2965, a range based on the 127.2% and 161.8% extensions of previous swings.
If we fail to overcome resistance, a test of the aforementioned 2743 seems likely and should indicate the conviction of bulls' resolve going forward. A worse case scenario would be to fall short of the previous high of 2801.90, thereby forming a lower high in what could become a prolonged correction or sideways action.
I did trim several long positions on Friday to lock in gains, and I also put on some hedges in case weekend news puts a damper on next week's action. With the G7 summit, NoKo, and a litany of other geopolitical concerns clouding the view, coupled with a FedRes meeting and a slew of economic data, too, it seemed prudent to reduce risk and hedge against potential negative catalysts.
All that said, it seems the general trend is now decidedly bullish, but I still want additional confirmation to invalidate a potential bull trap before signaling an all-clear. But, until the tape says otherwise, stay long and buy weakness!
Comment:
We have fallen about 6 points shy of the 127.2% extension, and more importantly, have now set a lower high relative to the all-time highs in January. That's not to say that the recent peak will remain as such for an extended amount of time, but until proven otherwise, it appears the trend may be changing. I'll be looking for a heavy volume day to suggest true capitulation, but thus far volumes have remained at their typical low levels during summer months.