S&P 500 Trading Outlook (3-5 Days): Bullish into end of week with possible S&P 500 (NYSEARCA: SPY) targets at 2519-2523 and possibly 2548.
Look to buy any early weakness with an eye on managing position size.
The S&P 500 (SPY) had its largest rally in 10 years as this stunning period of market volatility continues. Incredibly enough, the S&P 500 was nearly in a bear market (down 20% from its peak) and set for possibly the worst December of all time before Wednesday’s strong surge.
Market breadth came in nearly 5/1 positive while volume hit capitulatory levels on the upside, over 30/1 in Up vs Down stocks. So nearly all the volume was on the upside and the TRIN hit a very low .20. Seven sectors rose more than 4% on the day, while three sectors, Energy, Discretionary and Technology, were up by more than 6%.
Overall, this move should carry stocks higher into year-end. This could also make for an interesting “Santa Claus Rally” period if the S&P can continue higher, setting the tone for a positive late December period which many believe has bullish implications for the following year.
For now, heading into the final two days of the week, the market is in a difficult spot, as momentum has now carried back to overbought levels quickly on hourly charts, while daily, weekly and monthly momentum are sharply negative. Prices are in “No-Man’s Land, having spiked into the close, but yet not back over areas of importance with regards to structure.
My thinking is that the initial bounce off the lows (like what has just started) could carry a bit further, but should fail and then give way to another retest which might actually break lows heading into January. However, the degree to which prices lifted so quickly is thought to be a larger positive from a momentum standpoint in trying to put in a low. Thus, any backing and filling should translate into pullbacks to buy into.
S&P 500 Futures Chart
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Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
