The market as represented by the S&P futures put in a strong week last week, continuing the bullish reversal from the week before. We were quite oversold two weeks ago, and this led to a V-spike reversal, which is something we see only occasionally.
After Tuesday, the market had a little difficulty pushing higher, though push higher it did, making firm closes on Thursday and Friday. It just didn’t continue to show the strength it had on Tuesday.
We are in nearby resistance now (the blue line around 1970, or so). I would expect the market to pause here and pull back a bit. I won’t be looking for a deep pullback, at least not early in the week. Any pullback on Monday is likely to find support around the 1940 level. A deeper pullback early in the week to test last Tuesday’s strong rally would likely meet initial support around the 1920 area.
As the week unfolds, I’d like to see this week’s lows holding above 1900. If it can do that and we see some buying come into the market later in the week, then the market will be putting itself into a position for another rally in the coming weeks, perhaps to test the highs seen in September.
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