At the end of last week, Goldman Sachs reiterated their prediction for the S&P500 large cap index (SPX). The SPX, Goldman says, will end 2015 somewhere close to 2100. On Friday the S&P 500 cash index closed at 2091.50, up 13.97 points for a 0.67% net weekly gain. In other words, by Goldman’s reckoning, we’re going nowhere fast for the next 19 weeks.

We disagree mildly with that prediction. We have the SPX ending the year a little higher, somewhere around 2200, which is Goldman’s prediction for year-end 2016. But we’re not prepared to argue about it because for us, knowing where the index ends the year doesn’t make any difference. What matters to us is what it does until then, and especially tomorrow and the rest of the week.

For example, the index futures (ES) closed the week about 15 points higher than the previous weekly close. But hidden within that quiet little advance was a pretty good mid-week whipsaw: the price dropped about 50 points from Monday to Wednesday, and regained about 40 points from Wednesday to Friday.

The week-to-week movement was 15 points; the intra-week movement was 90. And that’s why we are traders, not investors. We want to capture the bigger moves, and this week we could get 50 points on the way down and 40 more on the way back up. Knowing where it ends up on New Year’s Eve is just not very important.

This week

This week we have the major August option expiration, including the VIX option expiration on Tuesday, SPX option on Thursday and ES option on Friday. The sentiment favors the price going higher. But volatility will remain high.

Last week’s low could the low point in the current correction. If this analysis is correct, we should expect higher highs over the coming days and weeks and possibly another attempt at the bull market highs.

This week we may see the SPX decline to retest the 200-day moving average line once if the price fails to move above 2100. But as long as the index doesn’t close under 2065 for the week, the short-term movement still favors the upside.

ESU5

Friday the ES had an inside day, but closed at the top of the trading range with lower total volume. A break above 2110 could push the ES back up to the July high. A move below 2055 could cause the futures to drop to 2050-45 to retest last week’s low, but I don’t expect this will happen.

We will be watching for weakness and downward price moves for long-side entries, and will continue to focus on the buying side.

Major support levels for Monday: 2054-55, 2043.50-45.50, 2038-35;
major resistance levels: 2126.75-28.50, 2134-36.50 and none

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Chart: S&P500 cash index ($SPX) daily chart to Aug. 14, 2015