S&P 500 Index Testing Key Resistance
Posted in The S&P 500 Index (SPX) on January 31st, 2013 by admin – Be the first to commentBy Jim Donnelly, Olson Global Markets
With market psychology maintaining a bullish bias, the S&P 500 Index (SPX) closed Friday’s session on an upswing, testing key trend line resistance at the 1,503 level …with overbought conditions present on weekly charts.
Although a technical set up of this kind often results in a correction to the downside, momentum buyers have clearly dominated trading in recent weeks with gains being posted during 11 of the past 12 trading sessions on the S&P 500 Index. Moreover, the typical daily trading pattern over the past few weeks has started out equity prices opening on the weak side, only to be eclipsed by stronger buying activity later in the session. And while there are many fiscal and political worries are still present globally, investors have largely ignored the “bad news” and have instead focused on the “good news”, particularly through the current earnings season.
The prospect of a global economic recovery has no doubt forced “shorts” to cover, with investors warming up to the notion that things might be getting better economically. The latest evidence of this was a sharp decline in weekly jobless claims, which portend a set of upwardly revised forecasts for the monthly jobs report due out on Friday next. An expansion of the money supply numbers along with a general improvement in the housing sector has also helped to renew optimism.
As a result, investors might well lift the S&P 500 index above key resistance at the 1,503 level soon. A solid move above last Friday’s close, however, could result in an “exhaustion extension” that “Elliott wavers” suggest is indicative of a bullish 5th-wave “leg”. Nevertheless, equity buyers appear to be in “control”, and could stay that way until perhaps a test of long-term trend line resistance that currently sits at 1,595.