The S & P continues to be locked in a wide trading range below the near term ‘double top’ at 1098.00/98.50. Friday’s trade again saw the bears test the 50% area at 1065 and the old low of 1066.25 and register a new low at 1061.75. But that was not enough to attract new selling and a reversal developed into the close at 1070 area. A close below 1062 remains key to challenging the 1052/50 area which represents the 61.8% retracement of the July to August rally and the late July low. Longer term we expect that area to break to offer the 1025/30 area and then the 1008/02 weekly support over the longer term.
But until a close below 1062 is registered expect this congestion over the near term along with a test of the 1078/80 area as early as today. Stronger resistance resides at 1084 ahead of the 1088/90 that remains the important area to close above to hint of a low within this wide trading range. A more difficult close above the 1098/1102 resistance (near term) would renew a threat to the 1112+ area and signal that the bulls are going to attempt to test that lower high at 1229.50. A clove 1080 is needed to stabilize this downward pressure and offer a test of the more important 1098.50 double top highs early this week. But until the 1050 or 1112 area is broken we think this two way trade will continue and we will attempt to trade it accordingly.
Strategy- Long at 1064, stop 1068, target 1084 near term. Go short 1084, stop 1094, target 1062.