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May 18 Market Wrap

Posted on May 18, 2009 by Adam

Markets rallied all day across the board. This is a great development for bulls, especially since we managed to close above the magic number of S&P 900.

I’m still a bit skeptical about this sharp rally today, as the longstanding upward trend in the S&P was broken last week. We still haven’t tested 875 to the downside.

Interestingly enough, the market remained on bull confirmed on Friday, despite the selloff. If the S&P trades 875, it will go on a sell signal. This price action will also likely push the $BPNYA into bear alert. 875 also serves as support from a traditional perspective. It’s not guaranteed to give way, but if we do break those levels, we will likely head a lot lower in a short period of time.

The market needs to stay above 875 to avoid a sell signal

On the other hand, the bulls held the line on Friday and came out of the gate strong today. The S&P traded as low as 878, which you could argue constitutes a succesful test of 875. In addition, adjusting the trendline shows that this could be a buyable dip.

I didn’t buy today, but I could easily be wrong. I don’t have a great read on this market and I’m worried that it will make the next move without me. I’ll be keeping my eyes pealed to try and figure out where the market wants to go. It’s likely we could trade sideways all week, too.

Bulls will argue that this trend is intact. Here is what they are looking at.

I don’t know what’s going to happen. I’m open to suggestions if anyone is willing to offer. What do you think?