Despite a number of increasingly worrisome geopolitical concerns, equity prices continue to edge higher bolstered in part by low interest rates, a decline in commodity prices, reasonably good earnings reports (up to now) and an improving employment environment. Another important factor has been a 10.24% annual jump in Commercial and Industrial Loans from $1,546T on June 1, 2013 to $1,708T on June 1, 2014. Offsetting the loan creation news, however, has been a continued decline in the velocity of M1 money stock.
From a technical perspective, the S&P 500 Index (SPX) remains on an upswing, but is not far from testing key upward sloping trend line resistance currently sitting at 2,005. Overbought technical conditions are currently present as well, but those conditions have been in place since May.
It is worth pointing out that key trend line support (which began to rise on October 7, 2011) currently sits at 1,910 but will continue to rise over time. A break below that level would likely result in a potential move down to the 1,790 area which would be (roughly) a 9.85% decline from the July 3rd peak of 1,985.59. Would that please Wall Street bears? Perhaps. Would it be a big problem for equity bulls to handle? Probably not. Would such a scenario make everybody happy? Maybe, if that were the extent of it.
However, a solid break above key resistance now at 2,005 or a solid break below support at 1,790 would likely shake things up a bit and change the almost dispassionate mood that many investors appear mired in.