Still Glued to SPX 1180

  • Posted by
  • on September 21st, 2011

I recently shared my snapshot of breadth against $SPX, with 1180 being the magnet that has been touched each and every week since August 5.  I said that while the improvement under the hood led me to believe a bullish resolution was quite possible, the real opportunity would be in waiting for the week in which 1180 was not touched.

Despite the torrent of bad news, we haven’t touched it since.  However, the FOMC event coming this afternoon should give us a chance to see whether we separate or stay inside the range.  While recent Fed days haven’t been quite as volatile as in the past, getting past it on the calendar should go a long way towards resolving this range.  This morning’s snapshot near the 1193 low shows the following:

Favorable comparisons against the week of August 16, though still feels more like a fleeting undertow than a real tide of market liquidity.  I’d love to get another look at 1180 for more robust comparison, but each day that passes without touching that area lends credence to the bull argument.  Long-term technicals remain ugly, so the alpha dog in DC needs some shock and awe to shake money free at this point.

I can’t offer an explanation as to the correct valuation for today’s market, but the fact that prices keep returning to 1180 indicates some serious price memory there.  Not only have we seen it in each of the past 7 weeks before this one, but take a look at a longer-term chart and you’ll see 1180 play a role in 3 times you may remember…September 2008, May 2010, & Oct/Nov 2010.  Each time we pushed away, a powerful trend kicked in.  I expect the same this time, but until we push away it remains a schizophrenic tape in which $AAPL helps $QQQ run laps around $IWM.

I have no idea what the Fed will do, or whether it will work.  The best I can do is assess the market’s structure, and act assertively when I see something clear in the price action.  I’ll report back this afternoon if we get a sharp $ES_F selloff taking the index back into the magnet area.  If we don’t see another push into the magnet zone by tomorrow, skeptical pros may just take the ball and do their best follow the leader as they play catchup into quarter and year end.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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