On Wednesday, the S&P 500 opened the U.S. cash session (9:30 EST) lower only to close the day higher. Thursday, same action, different day. Friday presented us with the big miss in NFPs (worst since Sep ’10) causing the market to gap lower and then furthered its losses on weak ISM Non-manufacturing data; but once again buyers showed up despite negative sentiment early on in the day session. While the market didn’t close in the green as it had the prior two days, it did recoup most of its losses.
How do we interpret this price action? So far, it can only be interpreted one way – . When early-day weakness is repeatedly viewed as a buying opportunity by market participants it demonstrates a firm level of confidence.
The low of the day came from just under 2085 (2084.25 to be exact) before the market turned higher. This furthered this level of support we have been discussing over the past week. As long as 2085 holds on a daily closing basis, we will maintain a neutral to outlook. The sideways price action (consolidation) for the past week following the late May rise in conjunction with buyers showing up on dips should lead to higher prices in the near-term. If 2085 gives way, though, then we will shift our bias to the down-side, beginning with 2072 as the next level of interest.
Even with the market bullishly postured in the near-term, there is still plenty of resistance to overcome; 2105, 2111, 2116, then 2120’s up to the record high at 2137.