The S&P 500 Index opened today @ 1283.29. The low was made early in the day @ 1282.47. The market gradually drifted higher throughout the day before making a high @ 1291.93 and closing @ 1290.84. Today was a bullish day because the close was higher than the open. However, the volume was less than Friday's volume. I read less volume as a lesser commitment by institutions, funds, and wealthy individuals compared to Friday's price action.
What catches my eye about today's action is the Relative Strength Index indicator (RSI) on a daily basis. The RSI heading has dropped below the 70 overbought level and closed @ 67.81. The reading is heading higher towards 70. What I am looking for is a higher price action on the S&P 500 Index and a lower RSI reading then the last week's high. In other words, a reading higher than 1295 with a RSI reading below 70 would say to me that the market can be sold short. That's the setup.
We remain in a well-defined uptrend on a daily basis. The 13-day moving average is above the 50-day moving average. The 50-day moving average is above the 200-day moving average. Trend followers will "buy the dip" in anticipation of higher prices ahead. That strategy has worked since December 1. True believers in trend following will have bought Friday's dip in price down to the 13-day moving average.
In the next 1-3 days, I am looking for either (a) a new high @ 1300 or (b) a new dip to the 1274 level. The new high on a negative divergence with the RSI reading would be ideal. The new dip would just be a short-term buying opportunity until a new high is reached.
The scuttlebutt at clearstation.com is that there are alot of sell stop orders below the market @ at the 1250-1260 level. These people are looking to lock in profits. As a result, we have the conditions in place for a quick, sharp correction when the time comes. I view 1271 as key support on the S&P 500 Index.
Have a good evening!
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