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The 1200 level on the S&P 500, and to be more precise 1204, is shaping up to be the scene of a high stakes fight between bulls and bears. Besides he psychologically significant prospect of emerging victorious from a large round number like 1200, you will note that 1204 was firm resistance back in mid-August, as well as exact resistance last week before we turned back lower to 1136 (briefly) on Monday. Hence, the presumption is that there is a lot of pent-up demand for buyers looking to go long if, and only if, we can clear that level.
At the same time, the bears know that this is their opportunity to pounce on a rejection from well-defined resistance. The key issue now is analyzing the nature of the price action–Does it all fall apart quickly? Or do we simply digest the move higher and churn for a bit before eventually breaking out?
We know that over the past few days the technology and transportation stocks have been leading, while commodities have been somewhat lagging, especially my usual market “tell” Freeport McMoRan. I will be watching the energy/material complex in the coming days to see whether they are the canary in the coal mine, or whether they are simply poised to play catch-up.
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Come on you Gooners!