The Calm Before the Storm?
On many occasions, significant moves in the market occur after a period of consolidation. Consider the recent trading action in the S&P 500 Futures. The index had a significant period of consolidation back in mid-November when the contract posted four of five closes between 1765 and 1767.50. Once that area was cleared on November 13th (1778.75), the index reached 1800 only four trading sessions later.
At this time, the index has posted five consecutive closes within a three point range from 1801.25-1804.25, which is rare in this volatile trading vehicle. This area should act as major support early in this week’s trading, and could be the base to catapult the market higher (since it is hard to argue the trend is anything but up). However, if this 1800 level is breached, a much overdue significant correction could take place, taking the contract down to the 1775 level and perhaps even as low as 1735. It is critical that this market hold the psychological 1800 level this week.
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