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S&P 500 trades just above 1,175

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Early morning action started out bullish enough, but we've seen some profit taking and selling to early morning strength. The S&P 500 (SPX.X) did trade just above my $1,175 level I feel is current resistance, but then backed off that level and now trades 1,167.

As "unconventional" as it may seem, I came up with this $1,175 level several weeks ago by "rolling up retracement" on this index. This retracement was more of a "thought process" to help me try and define a level where a "new bull market" may truly present itself.

S&P 500 Index Chart - Weekly Interval

While I really use the bullish percent data to tell me what type of market environment the MARKET is in, the weekly interval chart with retracement gives hint of "what happened" and "what to look for" in the context of "bull and bear" market. Just by looking at the weekly chart, using the above retracement and monitoring MACD on the weekly interval, it is rather clear that something BEARISH really took place in late September of 2000. The break below the 1,400 level and MACD on the weekly going below zero. Notice how MACD had really stayed above the zero level for the bulk of the time previous to September 2000. With the SPX still below 19.1% retracement and MACD on this time frame still below zero, we should be cognizant that it is perhaps too soon to call this a "bull market."

If nothing else, I'm using this analysis to keep me honest and have me continuing to book gains on bullish trades when I get them. If a stocks moves up more than 7% from entry (stock, not option) then I want to be raising a stop to a minimum of break- even. If I get a 10, 15 or 20% move, then I'm looking for the door or at least selling part of the position and creating some gains for the account. I know for certain I will have some losses that will need to be offset. The key is to keep the losses at 10% or less (stock, not option).

Jeff Bailey
Senior Market Technician
Option Investor

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