I’ve been writing at mianalysis recently about two themes. The first is a paradigm shift is taking place from reliance on central bank stimulus to plain old optimism toward the economy and corporate earnings (remember when that was enough to push share prices higher?).

I expect this shift to put the primary uptrend in stocks since 2009 back on course, but that there will be growing pains during the transition, which is already apparent. The second is that stocks need to come down to levels that the bulls can handle based on the positive outlook for growth but with reduced liquidity, as the Fed scales back stimulus.

KEY CHART SUPPORT

I don’t see any evidence that we’re there yet. The nearest technical support for the S&P 500 is 1542.7. This is a 23.6% retracement of the uptrend from October 2011 to May 2013 – a natural percentage retracement to occur before the next turn, based on the Fibonacci sequence. SPX 1542.7 lines up with the floor of the congestion in March and April. Momentum is still weakening.

Both the short and long RSI averages fell to lower lows Friday and aren’t anywhere near oversold readings.

Time will tell if 1542.7 is tested and if it becomes a lasting floor. To start, it’s an important level for position traders to watch as a potential long entry point.

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