I know lately I haven't published quite as many e-mail newsletters as I normally do. But, if you've been to the website within the last couple of weeks, you'll know why - the bulk of my commentary has been getting posted there instead. With that said, I'm going to talk about the market and some trades today (as I normally do), but I'm also going to highlight the 'best of' you may have missed on the site. Anyway...
How 'bout them bulls, huh? Over the last week and a half, the S&P 500 has rallied - to my surprise - a hefty 8.6%, not to mention that it toyed with new multi-month highs for a while today.
And, therein lies my concern. As we've approached current levels, we've also seen a clear slow-down in the pace of the gains. Plus, though it was never really all that strong to begin with, buying volume has really dried up this week.
Oh, did I mention the market was almost as technically overbought as it's been in months?
The last time all the major indices were this far removed from their short-term moving averages was March 23rd through March 26th. And yes, stocks were reeled in on March 27th and 30th, thus relieving the overbought problem.
Stocks almost reached similar 'overboughtness' (being the editor, I reserve the right to make up words) on May 8th. Again, they sold off pretty dramatically over the next few days.
Based on history and odds, I have to expect a repeat of the pattern... stocks can only move so much in a certain period of time.
What we don't want to forget here, however, is the bigger picture. In late March and early May the selloffs clearly didn't kill the larger uptrend (and the bears had more than ample opportunity to do so earlier this month). In other words, I'm expecting any impending dip to be an entry opportunity rather than a reason to panic.
As for a bearish line in the sand, I'm pegging support for the S&P 500 at 873. That was basically July's low, but it also happened to be a ceiling/resistance line in February and part of April.
Secondarily, we may see support at 915, where the 20 day moving average line is currently resting. That's been a key support and resistance level lately.
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