Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude market...
It’s Time to Watch the S&P 500
12/13/2011 8:30 am EST
We’re in more tumult, but there’s one indicator that can help you get a pretty good view of where we’re headed in coming days, writes Jason Cimpl of Trademaster Market Forecast.
When the market finally declined recently, it was a good one. SPX (the S&P 500 average) had consolidated near 1,250 for six sessions, but the bears were finally able to push the index lower.
Volume wasn’t heavy, but it rarely is these days. A few monster orders came through near the close (as the bulls were trying to push SPX back to 1,250), so we know the bears are still protecting resistance.
I continue to view November 28 as a must-hold level for the bulls. As long as SPX can hold the November 28 low near 1,160, the bullish trend remains in full force. Quite honestly, if we are dealing with a strong bull rally, 1,220 would not be surrendered by buyers until another high is made on SPX.
Proper caution still needs to be taken with each new trade, along with current open trades. While I believe we are headed higher over the next three weeks, the bears have a funny way of changing the tide of the market without any detection.
Last Thursday was a rough day for stocks. Our leadership sector, financials, were slammed 3.8% lower. The huge decline is not surprising given the 12% rally over the past six days. But leadership sectors will rarely lead on the way up and the way down.
Another leadership group, small caps, were also obliterated yesterday. Again, the decline was not surprising, given that small caps had risen 13% over the past week. But I don’t like seeing leadership groups lead both ways.
The EU summit is now over. The EU, along with investors, hopes that what they’ve agreed to will help right the Eurozone countries, if not the EU in general.
The UK’s David Cameron shut down any hope of all 27 EU members getting on board on Thursday. And it was the right call. The economic situation in the UK is far better than the rest of Europe—as a leader, David Cameron was looking out for his nation’s best interest, and that was the right thing to do.
To their credit, the summit did accomplish a little more than scheduling another meeting. Financial leaders from 23 countries agreed to work out a treaty, and additional contributions were also made to the IMF.
While the agreement to agree to an agreement wasn’t the most hoped-for outcome, it most certainly wasn’t the worst. The market still needs to cool off from last week’s hot rally.
But Friday’s agreement to agree on an agreement should provide the indices with stability. And I think any pop over 1,250 sets SPX up for a big rally this week.
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