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S&P 500 Found Support and Rallied

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If you look at the chart above, you can see that in the blue circle I’ve drawn the S&P 500 Index dropped to support yesterday and bounced higher. Today it built on that bounce and moved up again.

This is pretty standard price action and indicative of a healthy market. The S&P finally broke through the 200-day moving average around 925, marched up to 944, then returned to test support. Support held and we are back in the 942 area. Adding to this, the test was on lower than recent volume (see the red circle) and the Accumulation/Distribution indicator (see the red arrow) showed that the buyers were still present.

Originally, my target for this rally was 975. I am not yet ready to say that we need to raise the target nor am I ready to say we should take profits and move to cash. I am watching the movements in the market to see if it is healthy or on its last leg. A healthy market can move higher and one on its last leg requires cash to be raised.

The successful test of the 200 day moving average is a sign of a healthy market, but we will need several more days to confirm whether the rally has room to run. If it does, my next target will be 1050 (the intraday high hit last October during the heart of the crash).

Stay tuned…

Mark