What’s inside:
- The S&P 500 rips in unusual fashion given where it stands in context of trend
- Looking for a dip/consolidation to join trend higher
- Two lines of support lie not far below, a deeper retracement should go no further than confluence of support around 2214.
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On Wednesday, we said the S&P 500 was likely to continue holding a firm bid, which turned out just a few hours later to be an understatement. We’ve been conditioned since 2013, when the market first crossed above the previous record high in 2007, to expect a slow upward grind once trading in uncharted territory. While it was just one day, Wednesday’s rip was anything but slow and ‘grinding’. Perhaps it is just a one-off event, or maybe the market is ready to end the year with serious momentum.
In any case, we have no interest in trying to pick a top here. The trend doesn’t favor it, global risk appetite doesn’t favor it, bullish end-of-the-year seasonality doesn’t favor it. With that said, it’s difficult to establish longs at this particular point without first seeing some kind of dip or consolidation. It may be shallow and short-lived, but dip-buyers look likely to step in. We will operate with this bias until we see price action tell us otherwise.
For now, it seems prudent to patiently wait and see how the market treats the recent rip, and should we see constructive developments unfold in the days to follow we’ll look to potentially join the trend higher. The Feb 11 trend-line the S&P just crossed back above could be a point of short-term support to do just that, or a little lower at the trend-line off the 11/4 low. The lowest point of support that would need to hold before concern would set in, is the previous peak towards the end of November at 2214, which also roughly coincides with the top-side trend-line extending back to the early part of 2015.
S&P 500: Daily
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---Written by Paul Robinson, Market Analyst
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