By Lawrence G. McMillan
Despite positive seasonality, strong upside momentum, and buy signals among the various indicators, the market — as measured by Standard & Poor’s 500 Index — has basically repeated what happened before: it has failed at resistance posed by the 200-day moving average and by the downtrend lines connecting the recent tops over the past few months.
Tje S&P 500 rose as high as 1,269 (1,265 on a closing basis) this week, which was enough to slightly penetrate the 200-day moving average and to slightly rise above the downtrend line. However, “slightly” is not a breakout, and now SPX has fallen back sharply today – very reminiscent of what it did in late October, mid-November, and early December, the last three times that it challenged these zones. We would want to see SPX on a strong close above 1,270 in order to declare an upside breakout.
SPX is now back within the two trend lines that have been limited its movements for months. If it were to pull back to the lower trend line, that would be near the 1,210 level. A clear breakdown and close below the December lows (1,202) would be very bearish.
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