Buyers Beware

posted Feb 2, 2015, 10:06 AM by Katie Shook

February 2, 2015

The key number of the week is 2064-2068 on the SPX.  It seems this has become the new resistance area.  Every time buyers look to get a foothold things get knocked back down.  Frankly, there just aren’t than many buyers out there it seems.  Lots and lots of question marks.  I expect the 200-dma to get tested this week (at 1975 today).  And there’s a growing probability that we could see a more significant correction into the mid-1800’s if we don’t see support at the 200-dma.

This graphic basically tells the story:

Support and Resistance

We’re sitting on a support level right now around 1991.  But a failure there is going to send us headed towards the next green bar around 1950-60.  A failure there and we’ll likely re-test 1900.  Based on the way the trading and momentum patterns are setting up, it appears there’s a better than 50% chance we’ll test 1900 this month.

This week is particularly light in terms of economic data.  There will be more to come from earnings season.  And certainly oil will be in the spotlight.  But the bigger picture may be European QE.  Should assets start flowing back to their stock markets (which wouldn’t be surprising given how unattractive their yields are now) we could see the bid in our own markets lighten up a bit.  Absent our own QE, this could finally give the markets their excuse to do the 10% (or more) pullback analysts have been looking for.

The bigger question is, could we have a 2008-style market pull-back?  So far, that doesn’t look likely.  The Fed would probably step in again before that.  And the economy, on the back of lower fuel prices, should be able to continue growing.  Just don’t expect a sprint on this one.  Taking a look at the banking system, we’re still not healthy.  Lower rates may have improved balance sheets, but higher lending standards have prevented most of the money from being lent into circulation.  Until this equation changes, I wouldn’t look for anything too spectacular.

And let’s not even talk about Washington…  we can expect nothing there.  At least gridlock means things shouldn’t change too radically.

Key Numbers for the week:

Support:  2000/1991/1975

Resistance:  2018/2043/2068

Weekly Estimated Range:

Weekly Estimated Range 2-2-15

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