although several key technical factors suggest the bulls hold the edge for a short-term corrective rally bounce, the current short-term overbought situation together with the fact that the S&P 500 index is now facing strong resistance levels does not call for an immediate break to the upside. What this means is that the 1100 zone is too big and too important to fall quickly. The market will need to churn for awhile before the bulls regain the needed strength for another attack on that level.
Wednesday’s massive upside reversal suggested strongly that last week’s pivot low near the 1040 level in the S&P 500 index may have been the bottom. Money Flow measure is also indicating a weak bullish signal. This suggested that over the next couple of days, traders should expect at least a retest of major resistance near the 1100 level.
although the near-term trend had turned sideways as the S&P consolidates within a narrow trading band between the 1040 and 1165 levels, pressure still remains to the downside and the short-term floor at 1040 is wearing thin. This increases the probability that the index could follow a so-called trend channel lower, heading toward the important sentiment 1000 level.
the S&P 500 index had failed to take out the formidable point of resistance near 1065. That level is significant because it’s where the index gapped down last week. Staying below that level might herald more losses.
although Friday’s massive rebound looked and felt very good, the S&P 500 index is back to a point that represents heavy resistance for the market. So traders should not be surprise to see some selling efforts in the coming days. The weekly pivot low near 1040 represents short-term floor, if declines are seen below it, a massive new downswing will follow.
