Market Summary:
Over the past 7 sessions, the S&P 500 Index has continued to build upon and hold support at the 5400 level. This level is key as it represents the lows/base of the “island” which has developed coming off the June 12 gap up (thank you soft CPI data). The index has subsequently hit an all-time high of 5505 on June 20 and closed out last week at 5464.
So now what? I would maintain that the index is a buy/hold above 5400. However, if the gap from 5375 to 5400 begins to fill (5400 support breaks) that would create the potential for a significant “island reversal”. Such a reversal looks more likely as last week ended with shorter-term market trends and momentum fading. A full break of support would generate a downside target of 5300 based on both measured move expectations and Fibonacci Retracement counts.
Trade Support:
5426: 10dma
5400: Low/Base of the June 12 Gap
5300: Downside Target based on a 100-point measured move and 38.2% Retracement
Trade Resistance:
5500: June 20 High
