S&P 500 Tests Key Support


Author Larry Berman

Posted: 10 May 2012 re-posted from etfcm

The 1340-1357 zone once again was tested by the S&P 500 and provided a cushion for the market. It was key support on the past few declines in March and April and now again. A close below 1340 points to a move down to about 1290 from several technical measurements, we expect to see that lower support tested in the coming weeks to months. We cannot be sure exactly when, but odds are we see the test lower, perhaps even as low as 1257 (unched on the past year or two).

There is no predicting systemic (black swan) risk and market panic anxiety. For now, the euro risk is on the front burner, but both the euro and many commodities linked to it are oversold. Crude oil seems to be finding some footing below $96 and could rebound to $101-102 before dropping back to fair value around $85, if our broader market call is correct.

The highs for the year might be in with a break below 1340 confirming that notion. The complicating factor is the strong seasonal pattern in democratic Presidential cycles through the summer months. We covered our short and will look to sell again on a bounce above 1380.

 

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