S&P 500 Index Grinding Toward Key Resistance Area
Posted in The S&P 500 Index (SPX) on October 31st, 2010 by admin – Be the first to commentBy Jim Donnelly, Olson Global Markets
On the eve of the crucial mid-term elections, the Fed’s Open Market Committee meeting and the release of October’s jobs report, the S&P 500 Index (SPX) is slowly approaching a test of a key resistance area located at 1,260. That level represents two forms of “cross†trend line resistance as well the “objective†of a bullish reverse Head & Shoulders pattern that developed earlier this year between April and September.
Although the 1,260 level also represents a nearly 6.7% advance from Friday’s closing level of 1,183.26, a sharp post-election spurt higher may provide an opportunity to “lock in†profits before year’s end. In addition, without knowing what next year’s capital gains tax rates will be exactly, it might be a way to offset an unexpected policy risk as well.
Nevertheless, a move up to the 1,260 area, if it does occur, would translate into a 13% gain since the beginning of the year. That is more the double the current year-to-date gain of 6.1%. Overbought conditions are now present which suggest upside gains going forward may face a “head windâ€.
In any event, the upcoming trading week should prove to be one of the most important of the year with some measure of uncertainty removed, Federal Reserve and election-wise. That, in turn, should help investors and decision makers gain more clarity.