** S&P: Technicals **
September 22nd, 2006
The Technical picture of the S&P 500 Index looks a bit troublesome: on the short-term time frame that is. The index has basically recovered to its May-high but now seems to hesitate to break through that level. Since the Fed didn’t prove to be the catalyst to push the S&P through 1330 resistance, we think the short-term path of least resistance is probably lower.
A break below 1310 would be needed in our view (the short-term uptrend line) in order to start speculating that a possible double top formation in the S&P is being set. But at this stage, that’s too early to call.
The longer-term picture in the S&P is an interesting one. On the one hand the long-term uptrend is still in place, which indicates that once 1330 is cleared, we could easily see the index move towards 1360. On the other hand, the long term momentum indicators and volume are starting to show some serious problems which might be indicative of the S&P being in the process of making a top that will open the door towards levels in the 1250 area.
Conclusion: Short-term we would anticipate a correction towards 1310, below which 1250 would be the longer-term target to focus on. A break above 1330 on the other hand is a positive, generating a buy signal for a ride to 1360.