Monday, December 7, 2020

SPX Update: Battle at Intermediate Resistance Continues

On Friday, SPX rallied up to tag intermediate resistance again:

This remains the main game in town right now.  In terms of implications, if the market gets soundly rejected or (conversely) sustains a breakout, no change from Wednesday -- except to note that the 3640 level was good, and SPX held it and rallied:

If bulls can sustain a breakout over intermediate resistance, SPX has a good shot at running another ~100 points (or so) higher.  If bears can make a lasting stand here, they could push SPX back toward ~3500 next.  Near-term, the very first downside level appears to be 3640ish -- while a breakdown there wouldn't necessarily take us to 3500, it could be good for a trip toward 3608-3620, and is thus the next thing bears would like to see.  Of course, the fact that it's a level means that it's also a support zone, so there's no guarantee bears will break it at all, and the market may instead choose to rally right from the open.

Not much else to add at the moment... except just a random thought:  Bears are convinced everything is going to turn any minute, and maybe it will -- but nevertheless, the market continues to reserve the option of an extended fifth wave.  How could that come about?  Well, if the market were to get a whiff of inflation (hard to imagine after all these years, but as I showed a few updates back, we are printing like mad and planning for more -- so there's that), then we might expect to see asset prices react accordingly.  That's not a prediction at all -- it's just a note that we can't rule anything out entirely yet, nor should we.  

Of course, that brings us back to the present, and the first thing bulls need to do is prove that they can break through, and maintain trade and closes above, intermediate resistance.  Trade safe.

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