Last week may have been the break-out traders have been looking for as major indexes finished positive for the week.
After several months of correction it looks like the 200-day moving average for the SPX is likely to hold support. It has been tested several times. Each time a wave of buyers showed up. This is classic correction/recovery territory for a bull market.
The recent push higher has driven the markets into a slightly over-bought situation, but this may not lead to a significant pull-back from here. If the SPX were to pull back though, it support is likely to materialize at the 2700 level, or just below at the 50-day moving average.
The ‘set up’ right now appears to be one for the markets to move higher from here. Last week’s move validated support and pushed through the psychological resistance level of 2700. If this week finishes higher it’s likely the markets will continue grinding higher to re-test the January highs for the year.
Ironically, while the markets are showing ‘good news’ with things recovering, it appears to be the ‘bad news’ cycle that keeps things moving higher. Too good and markets worry the Fed will change monetary policy. Too bad and things are actually pretty bad. But not good? That seems to be the Goldilocks spot: not good enough for the Fed to change, but not bad enough for money to move out of the markets.
Goofy times we live in.
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