S&P 500 Bounces From Key Support Levels
The chart above shows the uptrend for the S&P 500 (SPX) that has been in place since mid-March. It is not drawn from the March lows, but rather from the first dip in the daily chart that the SPX experienced after its initial bounce.
Yesterday and today we saw the SPX again test this uptrend support, and so far it has held. Yesterday saw sharp selling pressure, with more than 90% of the volume coming from the downside. The last time we saw this was on 4/20, from which the market bounced and continued to rally.
I am suspicious that we can see a repeat performance. The Nasdaq has already broken its uptrend (ditto the Russell 2000), and I think the SPX will likely follow. That doesn't necessarily mean that we have to go back into bear market mode. It could just be a consolidation that lasts a bit longer than we have seen recently.
The SPX has already -5% from its recent highs. Remember, in 2003 all the bears that were waiting for that 10% correction before committing funds were sorely disappointed. We could see the same thing this time around.
As I mentioned earlier this week, the 875 level acted as resistance for the SPX for several months. After breaking sharply above that level, it would not be surprising to see it now act as support on a further pullback.
So far today, the market has responded positively to a worse than expected jobless claims report. This is a good sign, as we want to continue to see optimism in the market. Big picture I still get the sense that a lot of funds are underinvested for a continuing bull market.
Trading comment: Ag stocks continue to act well, but I am taking some trading profits on my MOO position. I am still bullish on this space, and will look to use a pullback to add back to the position. I am also bidding to sell our SSO positions that I have held for several months. The market has had a big move, and going forward I think the proceeds can be better put to use in sector etfs as opposed to the major indexes.
long MOO; selling SSO