I noted last week the news of the S&P500 cracking 1940. Shortly after that upside breakout, the bulls pushed that index to technical resistance at around 1990.
While I am not a Fibonacci follower, there may also be some significance to the fact that 1990 represents pretty close to a 50% retracement off of the lows (2135 high less 1820 low = 315. Half of that move is 158, added to the 1820 low = approx. 1980). I always attribute the significance of Fibonacci retracement levels to the fact that others believe in their significance—to me, there is no logic to it, but crowd and herd belief in these numbers make me mindful of their potential effects on the market. I am also mindful of the fact that the current area 1990-2000 represents both the old neckline of the summer double bottom, and the support levels from the late 2015 highpoints.
The market remains below its 200 day MA (which is sloping down), and below its old highs of 2135. As such, it remains in an intermediate bear market trend, with a near termed bullish bias – albeit an overbought one (stochastics). For the market to be considered in an intermediate uptrend, it will need to take out the 200 day MA, break the old high, and work off some of the currently overbought conditions. Can the S&P move above that moving average? The market often pauses whenever it approaches or hits the 200 day MA. My bet is that the US market will find some resistance as it nears or hits that MA – which currently lies around 2020.
This is not to say that you shouldn’t buy into this rally –but holding a bit of cash at this time remains a prudent strategy – given the intermediate termed bear market conditions discussed above.
Keith on BNN: Thursday March 10 at 6:00PM
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