Relief Rally?

While it’s unclear (and probably unlikely) the market has bottomed from here, there appears to a be a short-term relief rally set-up. There are resistance areas for the SPX at 4000/4020/4065.

This comes on the heels of the first positive week in the market in over a month.

It’s probably premature to start popping Champagne corks, but any relief from the relentless selling would be welcome at this point. The outlook for this week is at least positive. The set-up suggests a bias to move towards the 4000 resistance level.

Unfortunately, there still appears to be more risk than reward in this market. While the bias may be positive in terms of directional trend, resistance is closer than support. So we could fall more than we would climb if directional bias turns negative.

Looking forward, the 50-day moving average is likely to be a resistance area of significance. As suggested, the intermediate trend is definitely negative. However, sentiment has been so negative in many cases, it’s starting to become easier to see how stocks could start to find a bottom here. So we’ll cross our fingers for a bounce.

The primary issue is uncertainty at this point. Even Fed policy, previously pretty straight-forward, is now clouded. Handicapping where things go next is more a function of lucky guessing than actual analysis. Any number of things go right and this market could climb in a hurry. As long as the things that go wrong are the things predicted to go wrong, this thing probably continues to grind along in this big-picture range between 3600-to-4200.

Keep an eye on the 4000 resistance at 3750 support levels for the week.


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