S&P 500: Approaching Breakout Level?

In spite of the weak economic news, the S&P 500 Index has returned 20% since the November 20 low of 752. On Wednesday, the index closed at 903.25, which is above its 50-day moving average of 887. A confirming uptrend can be achieved if the index breaks above 916.

From a technical perspective, a concerning aspect of the increase is the fact the uptrend has been occurring on increasingly lower volume. With the start of the New Year just around the corner, increasing up volume and taking out the 916 level will be important technical factors to follow for the S&P 500 Index.

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Comments

[{5U}:]

The volume will get lighter as it goes higher because there is really no need to be in stocks right now as there are many more shoes to drop.

It aint "priced in"

Jan 01 11:20 AM

[secmaven:]

Momentum players and resting short sellers is all that it takes to move this thin market now that most investors have gone to government bonds.

Jan 01 11:30 AM

[toobad41:]

What about the 200 day moving average? It looks like it will be months before we even think about "getting in".

Jan 01 01:19 PM

[jepittman:]

There are actually some plausible reasons for at least a decent bear market rally occuring soon.
(1) Credit spreads are narrowing
(2) Year end positioning by institutions is finished.
(3) Tax loss selling is finished
(4) Nonexistant yields on riskless securities
(5) Sentiment indicators still register high levels of bearishness and pessimism
(6) New President and Congress eager to address the recession

I do not mean to belittle the problems the economy faces but these are largely known and likely discounted. And the rally will be counter to the primary trend, which remains down. However countertrend moves can be significant and painful to those incorrectly positioned. We will see.

Jan 01 03:03 PM

[Alphameister:]

Agree with jepittman and would add that the yield curve is solidly positive while the Fed is flooding the economy with money.

Jan 01 09:28 PM