The S&P 500 cash index (SPX) closed at 1243.91 on Friday for the first time at an annual high level. It was up 3.42 points for the week, about 0.27%.
The stock market remained in holiday season and equities rallied strongly last week. Moreover, small cap leadership also remained firmly in place. It suggests the rally could continue into the end of the year.
This week is pre-holiday week. Even though the Christmas holiday will be on Saturday, some traders are already starting their holiday today, the rest will take on the following days. On Friday Dec.24, we close our room for Christmas holidays, and re-open on December 27. The trading will be haphazard that week and we expect to spend some time in informal seminars and answering questions from Members.
To see more of Nat’s market analysis, visit www.naturus.com
Technical analysis
WEEKLY OUTLOOK — S&P 500 CASH INDEX (SPX)
Last week, SPX made a new annual high and closed at high level. So far the bulls still take a control this market and it is likely that rally could continue into the end of year. But there are several things we should pay attention to, just in case a decline occurs.
- The market volatility index hit 15.46 last Friday, very close to the low of April 12, a few weeks before the May 6 sell off. There is a possibility SPX will repeat thzt kind of move after holidays or during the holiday season.
- The last American Association of Individual investors (AAII) survey came out at 50.23 % bullish, which kept the bulls above the 50% level for about 3 weeks now. Investment advisors, individual investors and mutual fund mangers are all showing high bullish sentiment. Who else will be left to buy to push the market up for further gains?
- Put/call ratio hit an extremely low level at 0.39 last week during intraday trading. The calls over puts were at the ratio of 3:1 during past 10 trading days. This is the highest bearish ratio in two years. If this robust call buying continues, it could be a wild declining for equities.
- The SPX has risen 11 of 13 trading days in the month of December. The 1250 level, which is a major psychological resistance for many traders and both the monthly and weekly resistance on the chart, is just above the current price level.
These are dangerous times and we don’t expect to rally much for this week. But due to holiday season, the price shouldn’t go down too far from Friday’s closing level either.
Monthly resistance 1250 and support 1145; Weekly resistance 1250 and support 1200
Daily outlook – S&P500 mini futures
Last week we mentioned a M pattern in the chat room. As long as ES doesn’t close above 1243.75 line on Friday — an important level for he weekly, monthly and yearly close — this pattern should stand.
The M pattern is not a bullish pattern. It suggests that the price is near or at the major top area. But the time period is wrong, and this pattern could wait in a sideways movement until next CIT day kicks in.
The weekly range should be expected to be 25-15 points. The current price has lots of resistance lines ahead of it: 1245.50-1247.50, 1249.75-1250.50 and 1255.25-1257. This indicates that upside move will not be easy. But due to holiday season, the rally may continue in the absence interest from the bears. A decline could also occur if the bulls are satisfied with their work this month and take holidays early.
ESH1 Daily chart
