Up Close and Personal

Editor’s Note: Depending on the sun, the fishing, and the relatives on Cape Cod these blogs may be a little sporadic, but we will endeavor to keep a pretty regular pace.

At the same time, our July monthly Insights has been a work in progress. It should be released this weekend (fingers crossed).

For quite a while we have been pointing to 879-866 as a tactical support range. In a sense “tactical” is a synonym for “intermediate.” Thus, it is our view that a decisive breach of 879-866 would do much to confirm an intermediate breakdown or reversal from the March-June uptrend.

That said, it is important to note that, while the S&P 500 has been “up close and personal” with that range over the past three days, support has held. Moreover, the pattern of the decline is increasingly corrective and near term momentum is more oversold than not. Thus, we need to be alert to the idea that the S&P will attempt to make another run back to the June highs in an attempt to overcome the building intermediate pressures.

S&P 500 with Daily Coppock Curve

As a result, the 879-866 is now important for two reasons. Not only is it tactical support, but a decline through that range would probably reverse any attempt by the index to strengthen the near term trend. A decisive break of 866 would likely open the door for further weakness toward at least 812-777.

Conversely, the ability to rally through 898-904 would do much to lock in the decline from at least the July 1 high (and possibly from the June 11 high) as a corrective pattern. That, in turn, would bolster the notion that the index still has one more post-March run in it. So, above 898-904, resistance will likely be encountered at 924-932; beyond that we would look of June’s 956 high. Nonetheless, we continue to respect the bearish intermediate momentum and cycle conditions, and would treat any such “run” as an aggressive counter trend trade.