The fundamental valuation target range of my Current-Situation Scenario was revised up to 6,195-6,490 in the September issue. On the charts, the S&P 500 Index (^SPX) has notably traded more or less within the new target range since late June, when the lower bound of 6,195 was first breached, writes Tom Essaye, president of the Sevens Report.
The new range provides a midpoint scenario target of 6,342, up modestly from August’s target of 6,269. And the midpoint effectively began to act as a technical “pivot point” from mid-July through mid-August. The index oscillated on either side of the new midpoint for nearly a month until an early September pullback from fresh record highs stalled just 12 points below the midpoint.
That resulted in the formation of a “Double-Bottom” pattern on the daily and weekly charts. Finally, the Current Situation’s upper bound of 6,490 has notably presented resistance for the S&P 500 with the index only notching three closes above that level.
Bottom line: The S&P 500 has spent the last two-plus months trading within the bounds of the Current-Situation Scenario price target range. If/when we see a material break to new highs in the S&P, expect the upper-bound of the Current Situation range to begin to act as price support as the bulls take aim at the Better-If target above 6,700.
