Chart of the Day: S&P 500 Struggles Withing Trading Zone

I have mentioned recently that the S&P 500 was stuck trading within this zone marked by its 50-day average as support, and its overhead 20-day average acting as resistance. You can see these two lines in the chart below.

Its 20-day average has also coincided with the 1200 level, a big round number analysts like to watch. This morning, the SPX has briefly pierced that 1200 level to the upside, but we need to recapture it on a closing basis for it to really count. It would also be nice to see volume levels exceed yesterday's tally, so we shall see.

There have been several distribution days (read: high-volume selling) in recent weeks, so we need to see this trend reverse. For that, we need to see rallies start coming on higher volume, and pullback come on decreasing volume.

The recent pullback in the market is roughly 4 weeks old, so that is certainly enough time for a market pause to have run its course. If the positive action continues from here, it will be a textbook shallow pause in the market, which lasted approx. 4 weeks and saw the S&P pullback about -4.5% from its highs.

If you look at the action of many of the leading growth stocks, they have continued to power higher in recent weeks. I like to think of them as leading indicators, which would lend itself to the notion that the overall market will play catch-up and enjoy a year-end rally from here. Of course, we need the flare-ups out of Europe to subside, but there are always thorns in the thesis, so that's not new.