By Andrew Nyquist
Over the past few days, the S&P 500 has been able to pierce 1257 briefly, only to close at or below the level. So why is this level so important, and why might it indicate a “Santa” rally to 1325-1350 if it is taken out to the upside on a closing basis?
Well, there are a few reasons: 1) 1257 is breakeven for the year, and the market has a good memory. 2) 1257 aligns with the downtrend line and is the midpoint of the pennant breakdown from a couple weeks ago. 3) 1257 is the .618 fibonacci retracement of the annual high (1371) and low (1074).
If the market does breakout to the upside, a logical target for the lift would be 1325-1350 around December 21-22. Why? Well the initial leg of the rally lasted 19 [market] days and lifted 186 points (on a closing basis). The pullback then lasted 19 days, falling to 1158. Another 19 day rally targets December 22nd. And further, if time and price align, a similar move higher would target 1325-1350. Now this all sounds nice and neat, but the key is a close and sustained move above 1257.
*Note also that the daily DeMark sell set up count is on bar 6 and needs to close today above 4 bars earlier (1246.96) to continue. If the set up plays out, the market could perfect the setup by Friday and entertain a brief pullback early next week. Currently just speculation, but something to watch…
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