In focus: Bulls refuse to yield

By Lawrence G. McMillan

In a brazen display of strength, the stock market — as measured by the Standard & Poor’s 500 Index — held up very well this week. Tuesday was perhaps the most crucial day in that a large number of traders had pre-announced that they would become sellers upon the news that either a) the Greek debit crisis had a definitive settlement plan, and/or b) the Dow Jones Industrial Average hit 13,000. Both of those things occurred on Tuesday morning, and yes the market did decline — at first. But then it rallied back to close slightly higher on the day. More of the same sort of tepid selling occurred today, but the bears have not been able to create any follow-through to the downside.

The rally was tested last week as well. For three straight days, mid-day selling took S&P 500 down to the 1,340 level, but each day it turned around and rallied. Then, on the last two days of last week, SPX closed at new post-October recovery highs. The week before had also seen the 1,340 level provide support. So that level is now quite prominent in our thinking. As long as it holds, the bulls are in charge. Should it give way, then a more bearish stance would be warranted. The long-term trend line that connects the October and November lows, and is the defining measure of this bullish phase, is currently at about 1,290...

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