Back to where we started … As seen in the graph below the S&P 500’s multi-day rally back from the dead has brought the index smack dab backup towards its recently broken support zone near 780 to 740. This zone of resistance is likely to stall this rally short-term given the fact so much trading activity occurred around this level before it finally gave way. However we are never one to argue with the tape and certainly the advance/decline stats as well as the up to down volume readings the last two days suggest this market may be able to overcome this resistance easier than we would have previously imagined.
Click on the graph for a larger image
Additionally with AAII Bullish Sentiment as low as 18.92 last week there is certainly enough bearish sentiment out there to suggest investors are under-invested and sideline cash is quite ample to support a continued bear market bounce. With the quarter ending in just a few weeks we would also imagine that institutional (long only) managers will add liquidity here as to not fall too far behind the market relative return numbers.
If this resistance zone is taking out over the next few days week then the next resistance zone for the S&P 500 would be at 950.
Source: Kevin Lane, Fusion IQ, March 13, 2009.