The S&P 500 cash index (SPX) closed at 1319.88 on Friday, down 23.22 points on the week for a net weekly loss of about 1.73%.
The S&P 500 index (SPX) dipped below the 1300 line before finding support at its 9-week moving average and reclaimed its foothold above 1300 at the end of week.
Historically the end of February and the beginning of March has been a bullish period. But that doesn’t guarantee the market will go higher and stay high; it only means that the record favors the upside more than the downside.
Technical analysis
Based on SPX weekly chart (above), there are two similar movements in late Jan and late Feb. 2011. Both related to the possibility of supply disruptions in oil from Egypt and Libya.
In both cases the price moved back to the 9-week moving average and then regained the 1300 level. And both sell-offs resolved quickly to the upside.
Even thought the SPX hasn’t taken out the previous highs since the most recent pullback, the bull is not dead. The 1300 level now plays a major role.
The 9-week moving average line will continue to acti as support this week. As long as this line doesn’t give up its support, the upside movement can still continue for a little while; but there is limited upside potential and more downside risk.
There are many elements that suggest a downside movement. Based on momentum indicators, the intermediate-term has an overbought condition. There is some bearish divergence shown on MACD and ADX. And SST shows extreme overbought on weekly chart. Plus the bullish market sentiment has been changed to 36% from a previous high of 50%.
All of those conditions may prevent SPX from moving up. A break below 1292.50 line will indicate that sub-wave 3 top has been posted, a further decline toward 1280-1275 range should be expected.
Monthly resistance 1350 and support 1250; Weekly resistance 1345 and support 1250.
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