Why Bulls Need to Watch SPX 1,880
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In May 2013, the S&P 500 Index (SPX) broke out above twin peaks that occurred in March 2000 and October 2007. The breakout above this 1,555-1,560 area likely brought in market participants that were waiting to enter the market on a breakout, instead of risking making an investment at prior tops on a chart. With that said, we find it of interest to identify points at which these new investors experienced certain profit levels, specifically 10% and 20%, as such returns might inspire some profit-taking. We notice that the 1,710 area, which is roughly 10% above the breakout level, acted as a major speed bump beginning in August 2013. This area was finally taken out in October, with the index pushing higher to our second point of interest on a chart, which is 1,880. As you can see, 1,880 has proven to be very significant since March, as it represents a 20% profit for those who bought the SPX breakout in May 2013. Bulls are hoping that profit-taking will gradually subside around 1,880 to set up a short-term breakout within the long-term uptrend.
I don't have much to add regarding the 1,880 area - Todd did a great job. I'm more amazed the SPX is just 1% away from a new all-time high. With all the concerns over tech/small caps/momentum names diving earlier this month, it is just amazing the SPX is still this strong.
Bigger picture, everyone and their mother is fully aware how weak the May-October period is. Wouldn't it be something if the masses were wrong and we rallied during this historically weak period?
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