The S&P closed out a strong week, closing just below 1150.  Highs (January) are just above 1150 so the stock market sits on the verge of a breakout to the upside.  In late February and early march we got confirmation that the sell off down to 1045 was a “bear trap” and the daily uptrend has remained intact since those lows were put in on Feb 5.

If that breakout occurs the overall target is 1194-1200.  That said, the weekly average movement of the S&P is just under 31 points so it will take some some time to reach that target.  Short-term targets are 1162 followed by 1174.

The blue lines on the chart mark expected support levels on pullbacks.  At the moment they correspond with support at 1126 and 1116-1113 – these levels are fixed while the blue lines are sloping so their support values change over time.

At this point a re-test of recent lows near 1044 is highly unlikely.  A close above 1151 would indicate a strong likelihood of another wave higher.  The advance has been sharp and I do expect a pullback to the trendline but overall the outlook is bullish based on the price movement.

I continue to dislike the fundamental picture especially with some of the proposed programs coming out of Washington.  But I will keep this technical and will address my “fundamental” issues in my weekend Newsletter (sign up on the right – it’s free!).

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S&P 500 Daily - FreeStockCharts

Cory Mitchell, CMT
~Know your risks when trading. Please read the Legal Disclaimer page.

The following is your weekly stock market outlook for March 8-12.  We will look at the S&P 500.

In last weeks analysis 1104 was the pivot point.  Holding above that was important in painting a picture in which the market could go higher.  At no point this past week was that point tested, and the result was a reaching (and exceeding) of the 1130 profit target.

The current upward trend which began back on Feb 5 is quite steep and a pullback is likely, yet with the relative close proximity to 52 week highs 1150 will likely be tested by the market.

Support now comes in at 1126-1124 followed by 1116-1112.  1105-1104 still has some relevance, but no longer a major level.  A drop below it though indicates weakness and a likely probe below 1100.  Support comes in further down at 1086 – but this is outside the average range for the market.

Average weekly range about 32 points.   The S&P closed out the week at 1138.70 and saw buying right into the close.

Little resistance hangs overhead, and a test of 1147-1151 is likely.  A move above this band indicates another wave higher and with clear skies minor resistance comes in at 1166 and 1180.  Multiple profit target approaches set out a target between 1180-1184 for the break.  This would be well beyond the average weekly range, so the 1166 target can be used for this week if we do see the market above 1150.

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Cory Mitchell, CMT

~Know your risks when trading. Please read the Legal Disclaimer page.

What an interesting week it was for the stock market.  Here we look at the S&P 500 for the shortened trading week of January 19-22.  But first, it was an interesting past week, and shows us a lot about what to expect going forward.

First off, some non-technical notes:  Wednesday was interesting; a MASSIVE order of more than a quarter million went through in the S&P minis!  That is a notional value of about $12,961,800,00.00!

There are rumors that the market is being kept higher by the Fed…that they may in fact be the mystery buyer of this market.  I don’t know if that is the case, but either way this market was marched higher in after hours trading during the last few months of 2009 and now intra-day we are seeing aggressive buying come into the market at key technical levels to keep this market in a technical uptrend.

No matter what the reason, price is what matters and here are the levels to watch for the upcoming week as shown on the chart.  Key support comes in between 1132-1130 which held off aggressive selling on Friday.  A break of that level does damage to the uptrend.  Some support comes in at 1128 with further support coming in at 1123.50 and 1116-1114.80.  The target for the breakout below 1130 is 1110.

The rising trend line which was broken on Friday (see chart) will act as resistance on the move back higher – on Tuesday this will be between 1140 and 1142 but will increase over time.  A push back above that line indicates a move towards the upper trend channel with resistance along the way at 1144, 1148 and then recent highs at 1150.  With “nothing but air” on the upside, resistance beyond comes in just below 1154, followed by 1160 and 1168.  After this little resistance remains until 1180.

The average weekly true range stands at just about 30 points.  Keep in mind it is also a shortened week for stocks due to a holiday on Monday.

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S&P 500 - 15 Minute Chart

Have a great week(end) everyone,

Cory Mitchell, CMT

~Know your risks when trading. Please read the Legal Disclaimer page.

I just wanted to take a quick look at the SPY.  With shallow volume and seemingly limited retail interest, the market is being driven around by algorithmic orders based on technical price levels.  When we break down the chart of movement so far this year, the stock market (we will use SPY, the S&P 500 ETF, as our gauge because it itself is easily accessible) has reacted well along trend lines.  Aggressive buying or selling comes in at the trendlines.

The phenomenon is likely to continue as long as the current market environment stays about the same.   Now that we have had movements which give us short-term trendlines on both the upside and downside, these trendlines can be used to aid us in the future.

These trendlines are not perfect, as hardly anything in the market ever is.  But moving forward the implied levels of the trendlines are likely to exact some impact on the market.  I will not lay out in detail the levels since they will change over time since the lines are sloping, instead I have attached a chart which shows the trend lines and important horizontal support lines.  The two circled price areas are just where aggresive breakouts occured, but which quickly corrected.

SPY (S&P ETF) 15 Min Chart

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Cory Mitchell, CMT

~Know your risks when trading. Please read the Legal Disclaimer page.

Overall, it was a fairly uneventful  week in terms of price action in the stock markets.  We had a lot of nice tradable moves during the week, but ultimately the market did not move into or out of any technical significant areas.  Volume was light, except for Friday which was due to index rebalancing and contract expirations.  In terms of the overall movement throughout the week, the S&P traded in a smaller range than average, only moving about 21 points all week; the weekly (14) average is just under 36 points and heading into this week was slightly higher.

Technically, the stock market (S&P and Dow Jones) are still range bound and that range is very much intact.  The S&P closed on Friday right around 1102.

Near term support is at 1094-1093 but movement below this level does indicate a high probability of retesting range lows.  Support near the lower range is 1086 and 1084.  A drop below 1080 (using a buffer below the lows) would punch us out of the range we were in.  The target for that breakout is 1055 which is just below a hourly trending support line (going back to Sept).  There is important interim support which will provide us with other signals if the breakout downward does occur.  There is little support, in the event of a break downwards, until 1072.  This is the top from a gap that occurred back in early November.  The low of the gap is 1070.  If that gap is closed by new price movement it is a bearish sign and prices are expected to continue to chart lower into the 1068-1064 area.  Support also comes in at 1060, therefore it will take fierce action, given our average weekly range,  to reach 1055 if in fact this market does break lower.

If we look at a daily chart, we see that the level we are at right now is right on a downward sloping trendline extending back from late 2007.  Really, the current range gives us our trading signals, as a breakout of the current range will also cause a break of the old trendline, a break lower out of the range will show that trendline has held.  But no matter which way the market breaks, old trendlines often have an impact on future price movements (see my article in the December issue of Stock & Commodities magazine), so it is worthwhile keeping on the charts.

On the upside we have resistance at 1104 which was respected during the afternoon sessions of Thursday and Friday.  Beyond this we have the Thursday open near 1106 followed by 1108 which will also act are resistance.  Beyond this is no significant resistance until 1116, although there is some minor levels at 1113-1114.  The resistance area near the highs is 1116-1120.  Moves have been fast and sharp up in this area, and it deserves respect.   If this range is broken out of, targets are 1123, 1128 and 1131.

The Dow Jones Industrials is another index can be looked at.  That market has been analyzed by my friend Adam Hewison.  He uses a few different tools to gauge this market, and also gives a slightly longer term view for those that are interested in looking beyond the next several sessions and are concerned about what may happen in the New Year.  So in that light, you can view the Dow Analysis video here: As the Dow Goes, So Goes the Country

With the holiday season I may not have an analysis posted next weekend.  So please pay attention to the range on the chart.  Have a wonderful and safe holiday season, and profitable trading in the meantime.  For those of you who view my EUR/USD analysis each night, well, I will see you soon, since we still got several sessions before Christmas.

Cheers and Happy Trading,

Cory Mitchell, CMT
Chief Market Strategist
-Know your risks when trading. Please read the Legal Disclaimer page.

The S&P 500 which is a good representation of the overall stock market is still very much range bound, and is likely to remain so until the new year.  A very quiet Friday with little volume did little to inspire confidence to the contrary.

1100 is the nearest main support level for the upcoming week, with a move below it indicating a test of 1098-1097 with the lower portion of the gap created Friday.  Support beyond is 1095-1094 but movement to this level does indicate a high probability of retesting range lows.  Support near the lower range is 1086 and 1084.  A drop below 1080 (using a buffer below the lows) would punch us out of the range we were in.  The target for that breakout is 1055 which is just above a hourly trending support line (going back to Sept).  There is important interim support which will provide us with other signals during the week.  There is little support, in the event of a break downwards, until 1072.  This is the top from a gap that occurred back in early November.  The low of the gap is 1070.  If that gap is closed by new price movement it is a bearish sign and prices are expected to continue to chart lower into the 1068-1064 area.  Support also comes in at 1060, therefore it will take fierce action to reach 1055 if in fact this market does break lower.  This is because the average weekly range for the S&P is just over 37 points, and the market closed on Friday right around 1106.

On the upside resistance is at 1109-1111.  A move above this area represents the likely scenario that range highs will be tested.  The resistance area near the highs is 1116-1120.  If this range is broken out of, targets are 1123, 1128 and 1131.

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Cory Mitchell, CMT
Chief Market Strategist
-Know your risks when trading. Please read the Legal Disclaimer page.

Before I get into the S&P analysis, here is a quick video from the other day which covers the NASDAQ.  The NASDAQ was strong compared to other benchmarks on Friday.  The video was recorded a couple days ago but is still valid and has some great content…always educational and informative.

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OK…and now to the S&P analysis for the upcoming week.

The markets tested the 1100-1100 area this past week, and have so far failed to push above it. While Friday was a down day, the Thursday lows held and we saw strong buying into the close, showing traders are still reluctant to head into the weekend on the short side.

The trend is still higher, but the market is losing momentum. This has been apparent on the RSI for some time, but despite lower highs on the RSI the market has pushed higher overall, therefore a divergence is only worthwhile once we see a break in price. The divergence does signal a weakening and warrants some caution on the long side.

Friday’s trading formed a bearish engulfing pattern on the daily chart, coupled with the fact it occurred at a pivotal resistance level, it does indicate a pullback. Again, price will need to confirm. A drop below 1073 (especially a daily close) would confirm at least a short term retracement.

A move below 1073 is likely to target 1050-1045. A drop below 1040 would break daily trendline support, but further support is likely by 1020. A drop below that level indicates a larger move down.

Since we are waiting for price to confirm, another move higher is still possible, but not as likely as a move lower. A move above 1102 will target 1111. A break above that will target 1125-1130.

Happy Trading,

Cory Mitchell, CMT