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PUBLIC: Still struggling with overhead resistance

Since the April 12th close below the 50-day simple moving average, we have not had a close back above it.  Price was briefly above that level on Thursday of this week, but was rejected back under by the overhead falling trendline from the lower highs that has formed.

How will the market handle the French elections? Similar to BREXIT?  All I know at this point is SPY is getting squeezed into a smaller and smaller space between $233 and $236 on the chart.  I believe the election is likely to give the market an excuse to break out of this range.  Because of how much energy has been built up, the breakout should be worth a good $5 to $7 move in the SPY.  If you look back at previous posts, I’ve talked about levels of support below the market, and once we clear the near overhead resistance at $236, it should be a fairly easy push to $237.50 and then $239.  Once we pop $240, it is clear blue skies overhead and who knows where this market will stop?!?

As a long term investor, you can’t let large gaps or external events shake you.  If you have been making a plan with the help of this blog, stick to it.  Raising cash to deploy is planning ahead, so you can use it when the time is right.  A drop below $233 means you will need to look for support to put some money to work.  A gap above $236 means you likely need to nibble into some positions and keep nibbling as long as price stays above the 50-day moving average on a closing basis because that means there will be areas of support below you again if the French Election results gives the market a turbo boost on the open on Monday.

  1. Dr. J
    Dr. J April 26, 2017

    Wow, did you read the comments from April 24th how spot on they are/were?!? Very cool. Overhead resistance was taken out twice with overnight gaps that as of this writing have NOT filled.

    When price moves above resistance, it typically becomes support. That means instead of fighting to get above resistance (and we didn’t clear ALL the hurdles I outlined yet, the all time high of 2401 on the S&P 500 has not been conquered), the old resistance has become support. Look for price to respect the 2016 top trendline, the 50-day moving average and close above them on a daily basis. If it doesn’t, that is a sign as noted above that the breakout to highs was false and it will most likely fail.

    As far as I can tell, this run has been fueled by another belief that proposed Tax Relief from the Prez is going to be YUGE. If you’ve heard the nostrum, “Buy the rumor, sell the news.” We may be at that point since the plan was officially announced today. Regardless of what you think of it, it is pretty clear the stock market did NOT hold the gains of the day and closed slightly down on all major indices. Are we going to go try to attack the gaps below us from the last few days? That would be my thinking. So watch the areas below price that should be support and see how the market reacts on a day-by-day basis going forward.

    Friday will be the end of the month, so subscribers will receive their e-mail and a blog post that is password protected. If you’d like to join the site, now is a great time so you can enjoy getting those benefits. It isn’t that expensive and the track record of the long term retirement system is pretty darn good! If you have any questions, feel free to send an e-mail.

  2. Dr. J
    Dr. J April 24, 2017

    The French Election did indeed produce an “event” and it was a large gap UP in the markets on Monday morning, 4/24/17. However, the gap ran into the 2016 upper trendline resistance in SPY and so far, less than 10 minutes into the trading session, has been contained by that overhead resistance line (but the S&P500 proper is above that same 2016 trendline, go figure). Yes, we are above the 50-day moving average and other resistance areas from March, but there are two left to take out: 1) the 2016 upper trendline noted in previous charts in SPY and 2) the 2400.98 all time highs on the S&P500. The DOW is at 20,750 as I write this, and the S&P at 2373. I’d say a move above 20,800 and 2376 respectively are pretty good signs this market wants to move higher. We’ll wait to see what happens at the end of the day, but early indications are that resistance is still in play, but is getting assaulted!

    End of Day Update: Price on the SPY did NOT exceed the top trendline from 2016 all day today. Not for one moment. If resistance cannot be taken out during regular trading hours, you know the drill: take it out with a gap overnight in the futures. It would not surprise me to see the market gap up over this important line some time this week in order to stop those pesky sellers from stepping in during the regular session to keep the market down. On the other hand, perhaps the market is truly enamored with President Trump’s promise of a YUGE Tax Plan on Wednesday and are going to bid the market straight up again just like they did in late 2016 and early 2017 leaving all kinds of gaps yearning for a gap fill? All I can tell you is that the market closed above a rising 50-day moving average, and “nothing bad happens when price is above a rising 50-day moving average!” If the top trendline offering resistance is taken out immediately, a tentative BUY nibble/scout position is very likely. However, as a short term trader, another retreat and close below the 50-day moving average or the top trendline would give me pause as to the validity of that nibble/scout purchase!

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