The S&P 500 is exerting a strong influence on the STI at this juncture. It has strong overhead resistance in the 785 to 805 region. Based on the recent close, it should rally to test that level soon. We need to observe how the S&P reacts to those levels before assessing whether there is still more upside to the current move. When the S&P 500 is testing that level, the STI should begin to slow down after one more upward push as well.
On 17Mar09, the S&P 500 closed near the high of the day at 778. Contrast this with the day before when price rallied but closed below its opening near the day’s low. This formed a shooting star candle that tells us a lot of selling came into the market. The combination of these 2 days tells us that there has been a good amount of selling, but it has been absorbed by new buying. This usually points to higher prices.
However, there are multiple resistance levels at 781 (projected monthly resistance), 785 (projected weekly resistance), 795 (61.8% retracement), 800 (round number) and 805 (approximate 50 day moving average and previous lows). How the S&P 500 reacts to these levels will largely determine whether the up move still has steam. Nonetheless, we should at least see prices begin to slow down and consolidate around this region. The 795 to 800 mark looks like an attractive target.
The S&P 500 has rallied sharply over the past week. It has the trappings of a technically driven move, with multiple oversold oscillators unfurling and taking prices higher. Although the move is displaying a good amount of upside momentum on the daily charts, we do not believe that this marks the end of the current bear market.
From the weekly chart above, we can see that the current move is not particularly significant with regard to the overall trend of the S&P 500. In other words, while the daily charts are rallying it has barely begun to register in the weekly charts. Because of this, we classify the move as a bear market rally for now.
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