Are the Bears Back?
The market continued its incredible rally higher on Friday. Volume increased as the bulls tacked on another gain and the SPX finished 5% higher for the week. More importantly, SPX was able to rally past 1175 again.
After the burst past 1175, buyers wasted no time and took the SPX all the way up to 1220 resistance. But much like in the past, 1220 could not be broken.
Over the past month or two months I have stayed bullish, but at the same time I refused to believe SPX could rally past 1250 without government assistance.
And my trading strategy over that time has been geared toward an upward biased market but with a ceiling. Accordingly, when SPX dipped below 1155 I added to our longs and expected 1115 to hold SPX up.
Then as SPX rose above 1200 I took a more bearish stance, and tried to protect our gains since SPX did not look ready to break 1250.
Currently, SPX is within a few percentage points of 1250 resistance.
Additionally, the index has rallied hard over the past few sessions. A pull back is expected today. But as long as the bulls can hold 1175, SPX should advance in another move higher towards 1250.
Obviously, Europe will continue to be in the news this week. But economic data is nearly non-existent. And earnings season is long over. So that leaves the Wednesday afternoon announcement by the Federal Reserve as the focus point for the week.
The Fed is widely expected to take action this meeting but it's unclear what they will announce. Some investors believe QE3 will be announced, while others think the Fed will stop paying interest on overnight loans.
I think the Fed will announce a new program as well. But the Fed has made it clear that they are running out of weapons and that Congress needs to start implementing programs designed to grow the economy.
The indices already opened negative this morning. Asia was down last night, and Europe traded with sizable losses this morning. Additionally, the dollar rallied, which will add pressure to the commodity market. Oil is off nearly 3% and even gold is down 1%.
