Key Algorithm Calculated S&P 500 Support/Resistance Levels: 4540 (LARGE) / 4530 (LARGE) / 4500 (SMALL) / 4480 (MEDIUM) / 4440 (SMALL) / 4420 (SMALL) / 4400 (SMALL) / 4385 (MEDIUM) / 4360 (LARGE) / 4330 (SMALL) / 4225 (LARGE) / 4160 (LARGE)
Assessment: I said in the FMA yesterday that I would be looking to open new bearish positions on a break of 4360. Coincidentally (or perhaps not), by the end of the day the S&P came to rest at 4361. It is this 4360 level that has been a very key one the past few weeks. We’ll see this morning whether we bounce from here or break under. We could see a bounce early in the day and then I will be looking at how high the bounce goes and thereby how strong the move. If a weak attempt that is stopped at 4380 and turns back, I may look to limp into a bearish position at that time. If we burst through this morning, I will likely look to open a new position or two.
The key for bulls and bears though is the 4280 level. A break there would confirm a new leg down. That’s a roughly 2% move from here. A break of 4280 and I would see a very high probability that we are headed to 4200. Then bulls may find support and mount an actual run from there.
So, plan is easy today…how do the bulls/bears handle the open at 4361…if they push higher, how high and strong is the move. Does it fizzle out at 4380 or burst through. A break of 4400 says the bulls have the ball. A break of the 4400 level and I will be looking to bullish positions.
Overriding all of this is a very strong interest in commodity based stocks due to inflation. Oil is taking off for no other reason than inflation. I think soon this will be the big and only story for this market. It’ll be inflation, what the Fed has to do to protect against it and how it could be resulting in stagflation which is very bad for corporate markets…and thereby corporate valuation…and thereby stock prices. That’s the longer term picture I am seeing and the risks out there to being bullish right now. First things first though…let’s see what she does with 4360. Good luck in your trades!