Technical Commentary for January 14th 2008 – S&P 500 STRATEGY: STAND ASIDE

The S&P 500 fell for the third week in a row, falling just short of the August lows near 1,370. The spike down on Wednesday took us to 1,378. We managed to close just over 1,400. We are now quite oversold once again so a rebound rally would not be surprising. As well we have the options expiration this coming week, and since they like to cause as many losses as possible the huge put buying seen today is sure to expire worthless.

ajor resistance is seen first at 1,440 then at 1,460. A rally back to 1,460 would be impressive and can’t be ruled out. As an outside, a rally to 1,480 and the flat 100-day and 200-day MAs would be ideal to set up the next collapse. Something like this would quickly bring back huge bullishness as many will declare that the worst is over and a double bottom with August is in.

We doubt that scenario but it will be a reason as to why the market will rally strongly this coming week. If that is to happen, the big up moves will occur into Wednesday and then go flat into the options expiration. [ read more... ]