It has been an interesting week. On Monday, we had what I like to call the “emperor has no clothes” selloff. Seriously, to whom is it news that the U.S. financial situation is a mess? Apparently, it was to some, as Standard & Poor’s placing of the U.S. debt on “credit watch” spurred massive selling. However, somewhere on the way to financial collapse, the bears ran out of gas. That day, the S&P 500 Index SPX +1.35% rallied to close above 1,300, putting in a bottom for the day at 1,295. That 1,295 to 1,300 area now is the major support.
Since then, SPX has rallied strongly, with a big upward move after positive earnings announcements, and apparently more to come. That puts the bulls in charge, but it is imperative this time that they take out the February highs at SPX 1,344. That would clearly establish the next leg up for the bulls. However, if the market fails again at roughly the 1,340 level, that would essentially represent a triple top.
One might have thought that the sideways action over the past two months would have been enough of a “rest” from the previous strong bullish uptrend, to be able to spur an upside breakout to new yearly highs. For the bulls to remain in charge, it will imperative to see that breakout soon.
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