Sunday, February 3, 2013
Feb 03. SPX, One Step From Confluence Area.
The SPX continues its run to the 1520-1540 confluence area – a home for two vertical count targets and the ascending internal resistance line. If the price is destined to take a pause in the ongoing rally, I think it’s going to happen in that area. Actually, on Friday the SPX stopped just 6 point short from 1520.
The price behavior around the 1520-1540 area in the short-term will help in projecting its next move. In the meantime, the horizontal count from the October – December retracement on the 1-box reversal chart gives 1590 as a potential bullish price objective. The strong price action in January, when only X boxes were printed on this rather sensitive 1-box reversal chart, makes the 1590 target believable. However, before the 1530-1540 targets are reached it makes sense to keep 1590 in mind and concentrate on the near-term price action.
All market sectors remain in buy mode. The Sector Breadth Model showed strengthening internals in the Financial, Technology, Staples and Utilities sectors this week. We have yet to see the signs of sector breadth deterioration to start worrying about a meaningful market correction.