Say what you want about this market, one thing is for sure: virtually no one is expecting a summertime rally. As I've noted a few times over the past week, I think we could have just made a substantial bottom, and it could be time for the bulls to have some fun once again.
Although everyone likes to be bullish, I noted clear back in early April of some weakening technicals and why a pullback could be coming. Then in late April, I again expressed concern that more selling could be in the cards.
Now, after the 6% drop in May and end-of-the-world calls that came with it, I'm saying be very open to a rally-- a potentially strong rally. So what if Europe is a mess and our economy is slowing? As traders, we can't worry about that type of thing. Let the talking heads on TV (which I play sometimes) worry about that stuff, and we'll just pay attention to the sentiment and price action.
With all that said, check out the chart below. We've noted for a few years now how substantial the 80-week moving average on the S&P 500 Index (SPX - 1329.10) has been for both the bulls and the bears. Sure, it isn't perfect, but what is? Well, once again we went down there recently and touched it -- only to bounce very nicely. Pays to keep it simple, huh?
What is the "all clear" level that so many of us want to see? (Aside from a total fix of the European mess.) I think a weekly close above the 1,333 level on the SPX could be huge. We've noted before this is double the 666 lows from March '09, and could be very significant. In fact, this area has been trouble a few times over the past few weeks, reinforcing how important it could be. Let's see if we can clear that level, but all in all, the worries I had back in April and May are quickly evaporating.
Why OIH Is Finding Key Support at $52
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