Trillion Dollar Bullet Extends Rally
The Fed fired another Trillion dollar bullet this week which effectively allowed the rally to continue its move upwards. From last weeks bottom of 666.79 on the S&P 500 we’ve seen a rally of just over 20% in eight trading days, not bad at all.
But as we predicted last week the rally faced extremely tough resistance and as of Thursday and Friday it has begun to take a rest. The question is now, what next?
Bulls want the S&P 500 to build a tight base. They are looking for a natural contraction back down to 730 – 750 then quickly the upward momentum to return. Volume will be key for Bulls and the continuation of critical heavy accumulation days are a must.
Bears are worried but confident the 800 barrier will not fall and while they can’t control excessive US government spending they have successfully held their ground at 800. Today (Friday) was a key distribution day for the bears and now it is all about momentum to return back to ultimately claim yet another set of lower lows.
Overall we may see some sideways action between the lows of 666 and 800 over the next few weeks but this would play in the favor of bears over the long run as the only juice bulls seem to find is from crazy announcements that only put another band aid on a broken arm. It doesn’t fix the core problem.
For analysis we have the S&P 500 and the Dow Jones. Make sure to look at last weeks charts beforehand because we nailed our numbers pretty darn well as far as resistance on these indices. And as far as the CBOE put/call ratio it took until Thursday but a bottoming at .65 yesterday helped fuel today’s selloff. The ratio closed back at a neutral .90 reading today.
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