The bears pushed it down to the 5 days SMA and the dip buyers came in and moved the market back toward the opening range high. Throughout the morning, the bulls and bears were engaged in a battle to move the market into positive territory or keep it below last week’s close. Shortly after 1:00pm, the bulls got control and moved the SP500 into positive territory and then take out last week’s high in the final hour. Once again, the bears got crushed.
Let’s take a look at the daily and the weekly chart of the SP500 and see why the bears are constantly losing the battle for control.
Looking at the daily chart, it is showing the SP500 continues to make higher high and higher low.
The SP500 is flirting with the 1044 level and the momentum favors the SP500 to test the 1044 level for support than to retrace back to previous resistance-turned-support level of 950. If it does retrace below the 1044 level, it will most likely be a shallow retracement to the 1010-1020 range.
The 1010-1020 range on the weekly chart shown to be near the 38.2% Fib retracement level from 2007 high to March 2009 low.
Since the SP500 has established itself above this Fib retracement level, the resistance turned into support scenario comes into play, thus make this a viable support level. Next major resistance level is the rounded number of 1100. From the weekly chart, 1100 just happens to be near the 50% Fib retracement level. A major pull back or a possible reversal could occur when the SP500 reached this 1100/50% Fib retracement level. But until then, the measured move from the inverted H&S pattern put the SP500 at 1250, and this level is near the 61.8% Fib retracement. Therefore, even if there is a pull back from 1100, there still can be another major upward move to 1250 before this rally comes to an end.
All these technical levels clearly show why the bears are having such a hard time to take control of this market. As the bears keep fighting these technical levels, they will keep losing the battles. As a technician, I will trade the trend identified by these technical levels until the market tell me otherwise. Will we get a major correction? You bet, when we get complacent, the market will slap us with a big selloff. Right now, there are still too many skeptics and too many cautious traders (myself included.) Therefore, there will be more upside in the near term.
