SPX S/R Week of 2/6/12

The SPX closed near the highs on Friday. Keystone has shown over the last few days how the XLK, then the Nasdaq 100, then the Nasdaq Composite, have all exceeded Spring 2011 highs to then post highs not seen since 2001, eleven years ago! At the same time, the Dow Industrials poked up beyond its closing high from Spring 2011 to close at a high not seen since 2008, four years ago! Thus, considering the SPX is now in the neighborhood of its Spring 2011 highs, the same trend will likely occur.

For the SPX, there is a gap left behind at 1360 that will need filling.  The closing high is 1364 from 4/29/11 and the intraday HOD is 1371 from 5/2/11. All three of these numbers may come into play in the days and weeks ahead but first the markets have to address where this long rally exhausts and pulls back.

The headache for the market bulls is that they are in nose-bleed territory so the target prices representing Spring 2011 will probably have to wait.  Charts are exhibiting overbot conditions, rising wedges and negative divergences signaling a pull back is desperately needed for the markets.  The main question will be where do the dip-buyers jump back in?

A move down to 1325, call it the 1320's, appears likely. At that time, many long players will buy the dip but perhaps the buying will occur too quickly, resulting in another leg down to the 1290-1310 zone. At any rate, a bounce will occur and judging by the long and strong profile on the weekly charts, except for money flow, should help elevate price back up to current levels and even attack the spring 2011 targets listed above.

On Friday, SPX punched thru 1337 strong resistance without losing a beat, the 1337-1339 cluster was a strong ceiling that folded like a cheap suit.  Respect must be shown to 1337, at a bare minimum, so price has to back test. Failure at 1337 would open the door lower.

For the SPX for Monday, starting at 1345 with bullish euphoria in place (CPC is 0.77; TRIN is 0.59; NYAD printed +2100 intraday; NYHL is begging to collapse, NYMO negatively diverging, and VIX nicely positively diverged--which is bearish for markets), the market bulls need less than a point to catapult the markets another leg higher. If SPX punches thru 1345.30, the large block buyers will enter in force and the bullish party will continue.  The bulls will likely target 1354. Thus, market bulls want to see green futures overnight Sunday to signal a happy Monday ahead, but, market bears want to see red futures to know they stopped the upward move for Monday's early trade.

The market bears need to push the SPX under 1326 support.  This is sturdy support and also the LOD Friday so a breach of this level will ignite large block selling and the markets will accelerate lower.  This area is where you have to watch the market reaction to assess the strength of the dip-buyers. A move thru 1327-1344 is sideways action.  The full moon occurs from Monday night into Tuesday so some further bullishness may occur Monday but the markets are likely to pull back Monday or Tuesday, the SPX likely testing the 1320's, then perhaps 1290's, only to come back up to possibly make a run at the spring 2011 numbers. At that time the charts will probably be negatively diverged and bearish so that may signal a significant top for the year.  These erratic, unstable, low volume, low volatilty markets require continuous monitoring and projections are reassessed hour to hour. Thus, watch 1345.30 R and 1337 S as Monday trading begins.

·        1409

·        1407

·        1404

·        1399

·        1391

·        1389

·        1386

·        1377

·        1371 (5/2/11)

·        1370

·        1368

·        1365

·        1364 (4/29/11)

·        1361

·        1360 (Gap)

·        1357

·        1354

·        1349

·        1347

·        Friday’s HOD 1345.34

·        Friday’s Close 1344.90

·        1344

·        1341

·        1339

·        1338

·        1337

·        1336

·        1333

·        1332

·        1331

·        1330

·        1329

·        1327

·        Friday’s LOD 1326.21

·        1326

·        1323

·        1322

·        10-day MA 1321.14

·        1321

·        1320

·        1319

·        1318

·        1316

·        1315

·        1314

·        1312

·        1309

·        20-day MA 1308.53

·        1308

·        1307

·        1306

·        1305

·        1300

·        1298

·        1296

·        1295

·        1293 (10/27/11)

·        1292

·        1289

·        1287

·        1286

·        1285

·        12-month MA 1284.42 (One of Keystone’s Major Secular Signals)

·        1281

·        1278

·        1277

·        1275

·        10-month MA 1272.36

·        1272

·        1270

·        1268

·        50-week MA 1267.62

·        1267

·        50-day MA 1265.18

·        1265

·        1261

·        1260

·        1258 (1257.64 start of 2011; 1257.60 start of 2012)

·        200-day MA 1257.47

·        1257 (3/16/11)

·        1255