The S&P 500 virtually hit the ‘l’ level last week before the release of the non-farm payrolls in the US on Friday night. The market has since come off as expected, and in the next week, I expect to see market momentum retest lower levels.
I’ll now be watching the index closely as it slips to around the 1,330 mark, which is where a nice bounce could – and should – occur so as to keep in line with an “orderly muddle-through” global scenario.
The positives and negatives in this chart are balanced at this point, so this ought to be one of the ‘real tests’ for the S&P 500.
Signing off from Adelaide, my “waters” (as Peter would say) feel more positive than negative.
Negatives
1) The S&P 500 has virtually, but not quite, touched my resistance level of 1,378 after closing on 1,374 on Friday. This is close enough for reaching my resistance marked with a little ‘l’. How it trades hereafter this is important.
2) In the next few days, expect downward momentum. How far it falls is important to the overall positive outlook of the ‘questionable target’ of 1,422.
3) I don’t predict fundamentals like economic results, but the US non-farm payrolls that came out on Friday night were disappointing with 80,000 jobs created for the last month. This was against consensus of 90,000 expected.
4) We are relying on Government intervention to pull us through.
Positives
1) Momentum is still on the upside with the 200-day moving average still pointing firmly up as indicated by the yellow line.
2) It doesn’t concern me that there may be further falls back to 1,330 in the coming days; the market can still move up in an orderly fashion despite the expected pullback in the short term.
3) The analysis is good with key turning points identified. The charts are not providing indications of an unexpected negative shock.
4) The tentative target at 1,422 (marked ‘T?’) remains in place.
5) The ‘muddle-through’ scenario remains in play. Bad news is good news. That is, only 80,000 jobs created in the US last month is actually good news as it brings the US, and other parts of the globe, closer to the possibility of greater monetary policy easing.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should consider the appropriateness of the information in regards to their circumstances.
Also in the Switzer Super Report
- Peter Switzer: How I’m playing this volatile market
- Paul Rickard: SMSF property loans: how the banks compare
- Tony Negline: What assets can I sell to my super fund?
- Rudi Filapek-Vandyck: The broker wrap: one stock dominates