The SPX is in a difficult spot. On the one hand, momentum in the smaller-cap stocks looks questionable; prices are above monthly trend; and earnings season has many concerned growth may be waning.
On the other hand, the prior intra-day high of just over 2940 is within striking distance.
So which way does the market go?
This is a tough call given that things seem pretty fairly valued at these levels. If you’re looking for a clear catalyst that drives equities higher, we may not know it until after the market has already placed its bets.
Markets aren’t in the business of sitting around and waiting for all the data to materialize. Often times they place their bets. Last week may have been an indicator as prices climbed while volumes dwindled.
Futures have indicated a fairly mixed open.
The trick looking forward is that the technical signals are mixed. At this point, the SPX is sitting atop a trend looking for a direction. Do we break out higher or retrace?
A healthy move for this market (SPX) would be to pull back to the 2860/2800 level the reverse to push on to new highs. What appears more likely is a move to take out the 2940 highs, followed by an even tougher decision about whether or not things should move higher from there.
The air is getting pretty thin at these levels. Markets seem to have moved higher not because of the news but because of a lack of reason for the trend to break. This makes things more fragile. A negative announcement could trigger the next 10% pull-back. But that doesn’t seem to be the prerogative of the markets lately. Given the now tired adage of TINA (there is no alternative), it appears the probability the SPX crosses the 3000 level this calendar year is still pretty likely.
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