The New Year has had 11 trading days and the S&P 500 has been up for nine of them. On Tuesday, the index gained 1.3%. Some of the market mavens attributed this strength to the election in Massachusetts. Go figure. Regardless, both breadth and up/down volume were positive by about a 5:1 margin. However, total volume fell 4%. The daily Coppock Curve is positive for 14 of the 24 S&P industry groups.
In recent comments, we have gone to some length to describe a potential domino effect. Our thought has been – and still is – that even a modest setback could have an impact on increasingly larger wave degrees. Indeed, in our recent Short Term Review, we suggested that a decline back below last Friday’s low could set those pressures in motion. It seems that the market sensed the proximity of an important support level as it opened strongly on Tuesday and never looked back.
S&P 500 Hourly
Now, with the index once again probing the 1150 area, we have to keep an eye on 1158. As mentioned in many past comments, the 1121-1158 range involves a number of important Fibonacci relationships. As a result, a breakout through that range would be, almost by definition, a bullish development.
Thus, the index has two potentially significant reference points: support at 1131 and resistance up to 1158. Arguably, the 27-point interval between those two points is something of a no man’s land. Frankly, our thought was that momentum, sentiment, and our wave count were strong enough to indicate an imminent breach of support. But, at least on Tuesday, the market seemed to have other ideas.
All that said, a decline through 1132-1131 during the balance of this week will effectively lock in the rally from December 9 as a complete pattern. Until that happens, we will continue to give the current trend the benefit of the doubt. Second support remains at 1086-1085.
A rally decisively through 1158 would do much to open the door for a move through 1200.
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