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Key Level

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I am heading to southern New Jersey to attend my niece's First Holy Communion (go Lindsay!) this weekend so this will be brief.

As you know, I don't believe every tick in the market and day of trading is a make or break for the market, so I am very hesitant to announce the market is at a "key level." That said, I do believe for a number of reasons that I have outlined this week, an important area of resistance is upon us.

• The market (as defined by S&P 500) is at the upper end of the near-term trading range


• The market is bumping up against its intermediate-term downtrend line.


• The market is currently reaching into intermediate-term overbought levels that have been associated with downtrend peaks over the past two years.


SPX is in a battle at upper end of trading range

Source:Baseline


S&P 500 is bumping up against its intermediate-term downtrend line

Source:Baseline


SPX has become overbought on weekly chart

Source:Baseline


Those charts appear to paint a rather negative picture right? The answer is yes, but the landscape can change pretty quickly.

I spent some time yesterday afternoon with someone who has forgotten more that I know about the markets. I mention that because the only way for me to get better at what I do is to remain teachable. This fund manager (and friend) closed the meeting by handing me a sheet of paper outlining what market cycles look like - every time -- and then followed it up with a look at the point & figure charts of the various market indices and their respective ETFs. He didn't give opinion, but just showed them too me. It capped a very educational meeting.

I concluded the market is at the upper end of a trading range that must be watched for failure or breakout. It's that close a call. If one had a negative view, this would be the area to act on it, as long as you're willing to admit a mistake on a move above both trendline and price resistance. I know that once the range is broken on price (945ish), the trading range becomes a bottom.

The bottom line is that traders and investors should use the current range to their advantage until it no longer is a range and becomes either a bottom or a top. The good news is the range is so clear that a move out of it will be very identifiable.

No positions in stocks mentioned.
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.

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