Last week, the S&Ps held just below the 1283.50 high put in during late October. On Friday, we pushed up briefly over Tuesday’s 1280 high, but couldn’t hold it. But, we didn’t sell off hard on the reaction. I view this as likely absorption of the residual supply from the sharp August sell-off.
Volume was light, however. You can see this on the weekly chart best. In part, this is due to the shortened holiday week. But we do want to see volume pick up soon, otherwise we can see a reaction set in.
Any reaction should not come as a surprise. We are in the early part of the month, which tends to see the most pullbacks. If we do get a reaction, I would anticipate it not going below the 1250-1245 level. In fact, if we did see a reaction come down around that area, it could set the market up for a very strong push up and through the current resistance.
If we continue to hold gains and absorption plays itself out, then look for a drive up and through 1283.50 next week. We will want to see good volume come in to confirm any drive up. If this latter scenario occurs, we can see price push up to the 1350 area over the coming weeks before becoming overbought.
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