The S&P 500 cash index (SPX) closed at 1176.19 on Friday for a net weekly gain of 11.04 points, about 0.9%.
October option expiration week ended Friday and investors will now continue focusing on company earning reports and the prospect of QE2 hints this week. Friday, Chairman Bernanke clearly signaled a second round of “quantitative easing” will be launched — printing more money to stimulate the economy (he hopes) at the price of debasing the dollar.
But he didn’t spell out any details. So the market is moving up in anticipation of Fed action, probably around election day, which coincides with the next FOMC meeting.
The SPX managed to breakout 1170-1175 range and held price above this range for close. The price behavior remains bullish, and it is likely to push price higher in the coming weeks if the support around 1170 holds.
So far the SPX has breached all kinds of patterns we predicted earlier. As soon as the price makes a breakout move, the pattern is invalidated and then sellers rush into the market to cover short positions, driving the price higher. Now it seems clear the price is heading toward April’s high around 1225, which is both the top band of the yearly consolidation area and the longer-term resistance level.
Monthly resistance 1210 and support 1100; Weekly resistance 1200 and support 1150
Market outlook – e-mini futures
ESZ0 Daily chart
The ES kept struggling to hold the price up around 1175 line. Upside momentum began to show signs of exhaustion. Obviously the price was managed to be held up by someone. Due to election two weeks away from today, we still expect that ES may hold up for another week. The price could move inside small week range from 1192 to 1160 for killing the time.
So far we haven’t seen a thrust move on upside to indicate that the uptrend is going to change. A small pullback should be expected, but this small pullback shouldn’t change major uptrend direction. Today IBM earning report may help to make a thrust move.
E-min Intrady – 60-minute bars
1185.50 is the key area Monday. Failure to break out 1185.50 overnight trading could pull the price down to retest 1169-1168 range (long entry). A break above 1185.50, could push ES to 1189-90 or higher up to 1195-96 (short entry). Because current price movements are distorted by the Fed’s interventions, we only trade on real price moves.
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