Strong Resistance Remains

August 2, 2006 · Print This Article

Over the past few days I have about talked about the importance of how the S&P reacts to the 1280 level. So far, the bears have been able to stand their ground although today they were thoroughly tested. SPY gapped up today and continued to advance into mid-day which pushed the S&P over the 1280 and then began to trade sideways (holding the 1280 level) until the final hour of trading. At the open it looked as though the gap would close given the recent bearish tendencies, the intraday overbought state of SPY, and the test of the 1280 resistance level. However, this was not the case today as the bulls were able to hold off the bears attempt at a late day sell-off. The gap is still out there and if you have been following my blog and glanced at members page on the website you know my feelings and the historical statistics that show how gaps have a tendency to close. Even though the gap did not close today the bulls were unable to hold the 1280 level and this could prove to be very important over the short to intermediate-term. The bulls have tried for well over a week to push through this level and have failed with each attempt and the bearish indicators are slowly starting to pile up. Something has to give. With the unemployment report due out Friday I am not sure buyers will show much conviction. Couple this with the bearish tendencies that I have mentioned over the past few days and we could see the gap close as soon as tomorrow. As I stated yesterday, the market will most likely trade sideways until Aug. 8 at 2:15 EST so be nimble.

RSI Wilder (5) for August 2, 2006