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One Step Forward

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The midday market surge seems to have halted, but not before the S&P 500 was able to plow through some resistance.

S&P 500 Daily Chart

Last week the S&P 500 closed above the May downtrend, and then proceeded to consolidate just below the 50 percent retracement level at 1,204. Today's 16-point move was enough to push the index past that resistance level. The S&P is now in the congestion zone between 1,204 and 1,240 that has contained the S&P 500 for the better part of June and July. Throw in the 38.2 percent retracement level and 50-day moving average, and the S&P 500 might once again get stuck in this marsh. If the index repeats the late-June pattern, it could set up the right shoulders of a bizarre two headed two shouldered head and shoulders bottom pattern. Yes it's bit of a stretch, but basically represents that the S&P 500 is trying to form a 2-month base.

Moving the S&P 500 higher is PeopleSoft (PSFT), while it's kinfolk Adobe (ADBE) is dragging it lower. Casualty and life insurance company Loews (LTR) is helping S&P 500 while its evil twin the retailer, Lowes (LOW), is hurting. Oil service stocks Schlumberger (SLB) and Haliburton (HAL) are doing their part to hold back any further gains in the S&P 500.

Jeffrey Canavan
Assistant Analyst

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