This Week Will Test the Resolve of S&P 500's Latest Move
With nearly a 5% bounce during the holiday-shortened week, there were hopes that Saint Nick would soon be here. But this is the week that will test the S&P 500's resolve.
– Yogi Berra
Now that the first food hangover has past and the annual face-stuffing, weight-gaining, season of overindulgence is upon us, investors are waiting to see if Santa is around the corner looking to bring tidings and good cheer. But as we know, it’s up to the House of Representatives and Senate to find, agree, and pass a fiscal cliff resolve before the reindeer can even be harnessed.
Oxymoron: a combination of contradictory or incongruous words.
As we’ve been hearing since the election there might be a ‘definite possibility of a violent agreement through intelligent government planning, political ethics and bureaucratic efficiency toward fiscal restraint and becoming deficit neutral.’
And some wonder why the markets have been so idiosyncratic. Two Friday’s ago on November 16, the US equity markets found a short-term bottom after being down 9%-plus from the pre-fourth quarter high of 1,475 on the S&P 500 Index (INDEXSP:.INX). With nearly a 5% bounce during the holiday-shortened week, ending precisely at a 50% Fibonacci retracement (1,409) and what we’ll call the ‘election-break,’ there were hopes that Saint Nick would soon be here. But it is this week that will test the resolve of this latest move toward the North Pole.
Click to enlarge
Technically these types of violent bounces are short-lived and the majority are retested before confirming a change in direction. Conversely, as of Friday’s half open day, the move seems to still have residual momentum within. The line in the sand for this technically important week will be at the Fibonacci 61.8% level resistance (1,425 to 1,430) where the SPX originally broke out into new highs back in early September. It is our firm’s contention that this will command the action for the next few weeks.
All being said it's important for investors to take a lesson from another season just getting underway – hunting season. Don’t shoot until you see the whites of their eyes as the risk may not be worth the return.
I will be traveling over the next few weeks on business and be at the Annual Minyanville Festivus Gala on December 7 in NYC with many other Wall Street professionals and investors. Feel free to let me know if you will be in attendance as we love to meet with our dedicated readers.
Hope this helps and finds you well.
Editor's Note: Read more at Tesseract Asset Management.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.