- During the month of February, we have seen the S&P 500 show a lot of volatility, but at this point in time, the market is likely to continue to look at the area that we are in as a potential consolidation area.
- The 6.125 level is a major barrier to overcome, and it is an area that has held true for quite some time.
- Underneath, we have the 5.800 level as a major support level, and therefore I think we need to look at this market is one that will probably spend some time trying to work off some of the excess froth.
That being said, it’s useful to recognize these 2 levels as being important, because we can get an opportunity to trade in both directions if we are quick enough. That being said, I’m not a big fan of shorting this index, and I will leave that up to you if you choose to. However, we have seen at the end of the month that buyers are willing to come in and defend the 5.800 level, and I think that will continue to be the case going forward.
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If we do break down below the 5.800 level, then the 5.600 level gets tested fairly quickly, which is where the 50 Week EMA is, and that could offer enough psychological comfort for people to get involved. On the other hand, if we were to break above the 6.125 level, the market could go much higher, perhaps reaching 6.450 level, based upon the so-called “measured move” breaking out of this potential consolidation range.
All things being equal, the market should break to the upside, but we also have to worry about a lot of different things around the world, but given enough time I think that soon enough we will see the overall momentum returning to the market, as the S&P 500 has been bullish for some time, so the last couple of months may have just been an exercise in working off the excess froth.
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