Watching 1087-1084

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On Wednesday, the S&P 500 was virtually unchanged, eking out a 0.03% gain. However, the index did manage to record a new intra-day recovery high before falling back to close just below its previous closing high. Nonetheless, breadth remained positive (by a bit less than 2:1) and up volume outpaced down volume by a 7:5 margin. Total volume fell by 8% and moved back below its 21-dma. The daily Coppock Curve still has a bearish bias for 22 of the 24 S&P industry groups.

Today’s rally may well have completed the “pop” from Friday’s low. An acceptable three-wave counter-trend pattern is in place and hourly momentum has turned down from overbought levels. There is even a modest negative divergence. This, together with the already deteriorating daily and weekly momentum background, suggests that all degrees of trend from intermediate on down have a bearish bias.

S&P Hourly
That said, the 1087-1084 area has repelled all setbacks over the past several weeks. Thus, even with the momentum and pattern pressures noted above, it will take a break decisively below that range in order to more fully confirm that the November-December ABC rally has reversed. Such a breakdown would allow for further weakness to at least 1081-1062 (a 38.2%-61.8% retracement of the overall pattern from the November 2 low). However, our primary focus for support is still on 1029. A break of that level would confirm that the post-July rally is over.

Conversely, until that 1087-1084 range is broken, we will give the November-December uptrend the benefit of the doubt. Thus, the door is still open for a more serious test of the 1121-1156 range that we have highlighted as a significant resistance area.