S&P 500: Bring back those hazy, lazy, crazy days of summer. Please.

 

This time of year used to be called “the summer doldrums,” with everybody on vacation and the markets snoozing peacefully through the long afternoons, stumbling sleepily toward Labor Day.

Not anymore. In the week just ended we had a coup — or perhaps an imitation of a coup — in Turkey; continuing discord and near-panic in European markets dealing with both Brexit and the prospect of a banking crisis; and what is looking increasingly like a summer of rage moving toward insurrection in a handful of American cities where Black Lives Matter, but perhaps not enough.

And today the Republican National Convention starts in Cleveland, marking the unofficial beginning of an election campaign between two of the most widely disliked candidates in American history, one of whom will become President of the United States.

No wonder then that so far in 2015-16, presidential election spending – both parties, all candidates – has reached close to $900 million, with the official campaign not yet under way.

The high cost of electioneering may explain why the Republicans chose the Quicken Loans Arena as the venue for their convention, while the Democrats opted for the Wells Fargo Center. At these prices you never know when you’re going to need a loan.

All this trouble and strife should have the markets on the ropes. And in Europe, China and Japan equity markets are laboring.

But not in the U.S. The index of US large-cap stocks, the S&P500, jumped another 1.4% last week to close at 2161.74, the highest weekly close ever, and substantially above the resistance level that has been holding the market down for almost two years. The S&P has gained almost 100 points since the traders came back from the July 4 holiday.

The index has clearly broken through the old resistance level (see chart) and the previous resistance (around 2135) will now act as support.

We think there will be retracements to retest that support, perhaps even this week. But the outlook is Bullish in every time frame.

The real economy is not thriving, but by contrast the market is undeniably strong, perhaps because every new crisis overseas sends more money scurrying for safety in the U.S.

We see 2200 as a realistic near-term target and barring some unforeseen disaster, the SPX could move substantially higher than that this year.

This week

The broken yearly resistance at the 2135 level should be acting as support this week. Beneath it, there is short-term support at the 2075-50 level and intermediate-term support at the 2025 level.

An ultra-short-term overbought condition could lead the index to make a minor pullback this week. But as long as the price stays above those support lines, the major trend is up and bullish.

We will continue to see buying on the pull-backs. Retracements, if they occur, will not seriously threaten the long-term uptrend unless the price drops below the 2000 level.

Today

For the S&P500 mini-futures (ESU6):

 

The ES had a minor retracement move Friday, and today the 2162.50-2165 resistance zone is important. As long as ES stays under it, it will encourage profit taking and the price could continue falling to fill one or more of the unfilled gaps (2030.25, 2046.00, 2120.50) below the current price.

2126.25-34 is the yearly range breakout level for the ES; formerly a resistance area, is has now turned into support. This zone is likely to hold ES up today if there is a larger retracement.

A break above 2168 could push a few points further up, but there is relatively little room on the upside. We could see sellers entering above 2168.

Support and resistance

Major support levels: 2133-28.50, 2103.50-00.75, 2093.50-92, 2085-83.50
Major resistance levels: 2164-68, 2180-85, 2196-93, 2210-12

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Chart: SPX Daily chart to July 15, 2016

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