Big Test For Spoos, Big Test For the Markets
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- S&P 500 trades at 4-month highs
- Important resistance test beckons
Big Test For Spoos, Bit Test For the Markets
The SPX500 (FXCM CFD that tracks the S&P 500) continues to hold up incredibly well. The overbought condition that we had at the beginning of the month in the index failed to elicit anything more than a modest week-long decline that was quickly reversed at the lower parallel of a pitchfork structure drawn from the January low around 2035 on Tuesday. An aggressive recovery has followed which has seen the index trade at its highest levels in over four months this morning.
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Judging from the commentary on CNBC and other financial news outlets it would seem the bull market is back and new all-time highs are nothing more than a forgone conclusion. I am not so sure. There is still one very important hurdle for the market to get through that comes into play around 2092 on the CFD chart. The resistance is best illustrated on the S&P 500 E-MINI chart (2085) which I have included above. As the chart shows, the index has respected the symmetry of this channel on both the up and downside over the past few months. This test of 2085 in the futures should prove quite important as it will hopefully shed a lot of light on the true nature of the advance these past couple of months. If the index can slice right through resistance and gain traction over the November/December highs it will be a very powerful signal that the long-term uptrend has indeed reasserted itself (not to mention trigger a pretty epic year-long bull flag). If we fail somewhere around 2085, however, things could get dicey and I wouldn’t discount another serious ‘risk off phase’ developing over the next few weeks. Stay frosty!
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--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.