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After performance results for the record books in the first quarter of 2019, the stock market is entering a very challenging period in April.
To be sure, the success and presumed benefit from a US-China Trade Deal remains a big economic and geopolitical carrot stick for the markets in the days ahead. How much of the anticipated trade deal dividend already has been discounted by the impressive Q1 gains is anyone’s guess at this point. Certainly, both the adjustment of the Fed’s interest rate trajectory and the prospect of renewed growth once the trade dispute is resolved combined to support the market during Q1.
Is the S&P 500 (SPX) on the verge of a sustained upside breakout as it pushes through multiple prior failed rally peaks just above 2800? This week should provide some answers.
Actually, a sustained climb above 2832 (on a closing basis) also will answer the question we have been asking in these weekly articles for the past four weeks: Will the powerful advance from the Dec 26 low at 2346.58 be stymied in the 2775 to 2832 resistance zone?
This zone is the area that measures 76.4% of the entire prior Sep-Dec correction — what we’re calling the “Fibonacci Recovery Price Resistance Zone” — and in the last 20 trading days the SPX has probed but failed to hurdle the upper boundary (2832) of this zone no less than five times!
In last weekend’s article, we focused on the relentlessly advancing S&P 500 (SPX) from its December 26 low at 2346.58 into an important Fibonacci price and time resistance zone at 2713.70 on January 31.
The 2713.70 level represented a 62% SPX recovery of the entire September-December decline, while January 31 represented day number 89 since the September 2018 all-time high, and the day that the December-January recovery rally time period equaled 38% of the overarching total timeframe from the September high.
We discussed the likelihood that the confluence of such meaningful Fibonacci price and time relationships could and should stall or reverse the relentless SPX six-week advance, and as such, would be a yellow caution flag for the bulls. (more…)
The S&P 500 (SPX) is right at a price zone pointing more towards a meaningful give-back in the short-term. This zone of resistance can be viewed through the Fibonacci price and time relationships on the daily SPX chart.
As the chart shows, as of Friday’s close, the SPX resided approximately 16% above its late December lows, amounting to an exact 62% Fibonacci recovery of the entire prior decline from the Sep 21 all-time-high at 2940.91 to the Dec 26 low at 2346.58.
The upcoming week is loaded with potentially significant directional markets catalysts such as earnings from mega-cap industrial names like CAT, BA, and XOM, as well as from technology powerhouses AAPL, FB, AMZN, AMD, and QCOM. At the end of the week, the BLS is scheduled to release the December Employment Report.
To my mind, though, the most consequential potential market-moving “events” will occur Wednesday afternoon starting at 2 PM ET, when the FOMC releases its next policy statement, and at 2:30 PM ET, when Fed Chairman Powell addresses reporters at the post-meeting press conference. The Fed will clearly have Apple Inc. (AAPL)’s earnings news from Tuesday after the bell on its mind.
Increasingly, my view of all of the action in ES (e-mini March S&P futures contract) from the Dec 25 electronic Christmas Day low at 2316.75 into last Friday’s (Jan 18) high at 2677.75 (+15.6%) represents three distinct psychological phases of market influence, which I have color-coded on this chart:
My article last week, “Tale of the S&P 500 Tailwind,” came on the heels of the Emini S&P 500 (ES)’s rally of 100.75 points (4.1%) off the 2019 low and 53.25 points (+2.1%) above the Christmas week close. On its face, the advance was impressive, but recall that I qualified my enthusiasm, stating the following:
“In the aftermath of the Christmas Upside Reversal, last week ES (e-Mini March S&P) traversed a range from 2438.50 to 2539.25… and ALL OF IT occurred on Friday (1/04/19) after Jay Powell acquiesced to the wounded easy money masses, appearing to become a kinder, gentler, and more investor-sensitive Fed Chairman.”