Don’t Look, Stocks Failed At A Critical Level Of Technical Resistance

Don't Look, Stocks Failed At A Critical Level of Technical Resistance

S&P 500 (SPX)

The stock market had a heck of a day. Entirely unexpected. Right? Well, not if you read my blog last night. But I admit I was only thinking we get an increase to 2915. What was surprising was how strong resistance at 2935 was today.

We failed on multiple occasions to rise through 2935 on the S&P 500, and it has me wondering if this is one of those up days that are followed by a big day lower. I would sleep much better tonight if I knew the outcome.

My guess for tomorrow is that we fall back and test support at 2915. We will see. Unfortunately we are still in a period of heightened volatility, and for now, we should expect for the market to be choppy.

At this point, it isn’t time to worry. But we surely do not want this to turn into a bearish reversal pattern known as a triple top. So a pullback to 2,915, must be followed by an increase above 2935.

(Click on image to enlarge)

spx, s&p 500, spy

S&P 500: A Path to 3,300

Despite the short-term headwind I’m still very bullish on stocks and continue to believe we are a path higher, perhaps to around 3,300. We have talked often about the fundamental reasons why the S&P 500 can continue to rise based on the earnings, valuation, and low-interest rates. But I also think I can support this theory using the charts.

But you can see in the chart below the long-term uptrend that has acted as resistance since 2012. Anyway, it can give us all something to ponder.

(Click on image to enlarge)

spx, spy

The Spread

The spread between the 10-year and the 2-year yields continued to contract today, despite rates rising. The spread is now just one basis point.

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Bank of America (BAC)

Yesterday the bank stocks were getting crushed on the tight spread. Today, the spreads were tighter, and the bank’s rally, makes tons of sense? Don’t get too excited because it looks Bank of America may only be filling the gap from yesterday’s sharp decline. I think it continues to head lower towards $25.75

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Disclosure: Michael Kramer and the clients of Mott Capital own AAPL and TSLA

Disclaimer: This article is my opinion and expresses my views. Those views can change at a moment's notice ...

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