With the S&P futures currently at 1098, it’s safe to expect a lot of obsession over the 1100 mark.
Waverly Advisors has some thoughts on where the market is, and what some key levels to watch are.
To put the recent price action in perspective, the year-long uptrend came to a pretty decisive end in early April, with downside momentum culminating in the ―flash crash lows. A subsequent retest of that extreme found support around 1020 (S&P Cash), and most recently buyers have been holding the market near resistance at 1,100. We are now at a critical point. If this 1,100 resistance holds, a retest of the 1,020 lows is quite likely. We have considered this to be our most likely baseline scenario for many weeks (dovetailing with our bearish strategic view), but the continued strength in market leaders and leading sectors has weakened this conviction somewhat. If buyers ARE able to clear 1,100, it is very likely we will trade to the 1,130 level and eventually to the measured move objective of
this pattern at 1,145.
From a practical perspective, short-term traders could trade aggressively with intraday momentum if, and only if, good volume enters the market. Real volume and clear intraday momentum will be a sign that we may be entering a more directional environment, but we do not want to get caught up in choppy markets with a lot of random noise. We have no clear directional bias, but are overdue for a trend day, so be careful of fading moves to either extreme. For longer-term traders, we may be nearing a point where it is reasonable to assume some broad-based index exposure. Early pilot buys in individual market leaders (as we have underscored for many weeks) should be seeing
good returns on this most recent rally, and we may be seeing the beginnings of some patterns that could support a large advance.
Photo: Waverly Advisors
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