The S&P 500 cash index (SPX) started the week higher on Monday morning around 1333 area, but sold off steadily into Thursday morning to the support level around 1300, then skyrocketed back up to close near the high of the daily range Friday at 1319.68, slightly lower for the week, down about 0.06%.
The SPX remains range-bound between 1300 and 1333.
The SPX may have a move down early in the week to retest last week’s low and bounce back later in the week for the Holiday weekend.
SPX Weekly chart
Technical analysis
Based on the SPX weekly chart (above) the 1340-1420 range is a tough area for the current bulls.
The 1340-1420 was a breakdown area in 2008; now 2 years later, the market revisits this range for testing and is likely to find resistance.
This could turn out to be the top area for the next bear market.
The strength of the upside move has been declining but the residual strength may continue carrying the price up until the bulls become totally exhausted.
For the long run, the SPX is forming a long term bearish divergence on its monthly chart. It may take several months to complete and give a final confirmation of the end of bull market.
For the short-term, the SPX still has to go back and forth to complete the final stage of wave 5.
During option expiration last week the market temporally ignored bad news: from Japan upgrading the severity of its nuclear crisis, and the disappointing jobless claims numbers.
But the negative earning reaction for Aloca, Bank of American, and Google should capture the market’s attention. The bulls are willingly taking chips off the table.
The market volatility (VIX) hit a low level (15) again last Friday. Even though VIX may go lower as it did in 2007, 15 has been a major support level since 2008.
If VIX moves lower this week, there is a chance for SPX to make a pullback.
Monthly resistance 1375 and support 1275; Weekly resistance 1350 and support 1300.
This is an excerpt from the Naturus Market Preview for the week. To see the full document, go to naturus.com and register.
