By Jim Donnelly
With all-time daily highs scored with regularity since October 9th , the question now on the S&P 500 Index (SPX) is: Where is key resistance and will that level somehow trigger sellers to take profits? This is a particularly good question at the moment since there is a sense that a race to get performance before the books are closed at year-end is forcing the hands of some investors to buy in a form of a capitulation. Some call this phenomenon a melt-up.
From a technical point-of-view, resistance does appear to be within reach when looking at a weekly S&P 500 (SPX) chart on a semi log format. It shows that the top of an upward sloping trading “channel” and an upward sloping trend line converge at the 1,830 level with overbought conditions clearly present.
That being said, bullish price action in equities has broadened out to both mid- and small-cap stocks, which is a positive sign. A reversal to upside in emerging market equities has also been ignited. Moreover, dovish comments made by Janet Yellen at her nomination hearing last week were clearly equity-friendly since she appeared to push out the prospect of a taper to a later date, or at least to a time when the economy looks less fragile.
In any event, the end of the 2013 calendar year is quickly approaching highlighted by a concurrent rise in the level of the S&P 500 Index. Perhaps that combination of events will eventually result in some profit-taking near the 1,830 resistance area that could, in turn, lead to a tradable consolidation.