Looking for a Break Through on the S&P 500

The broad market indices all jumped higher the last 20 minutes of trading on Friday. Thus, I thought it important to look at what it meant to the chart and resistance within the current trading range. Technically speaking the markets continue to trade higher on the prospect that economic growth is on the horizon. We could all argue the pros and cons of that happening, but the reality for the near term is focused on will the indices break through resistance and continue the current trend to the upside?

As we have discussed on the daily updates the resistance is 930 and the support is 880 currently. The momentum is to the upside and the money flow is positive. The spike in volume into the close Friday is a good and bad issue. Good from the view it was technically strong, bad in the sense of trusting the data point. Last trading day of the month last few minutes of trading? Interesting to say the least.

Thus, we have to watch any move higher this week and determine if the trend moves of doesn't? Plenty of money searching for a home due to the flood of money put into the system to stimulate the economy. The biggest stimulation has been to the stock market. As you know I am very suspect of this move and cautious about the continuation of the upside. I am not saying I wouldn't take the plays as a result, but I would use tighter stops and protect against the downside.

iShares S&P 500 Index Fund (NYSE: IVV) or S&P Dep Receipts (NYSE: SPY) are the ETFs for the S&P 500 index. If you want to play the move to the upside wait for a break through the resistance points and expect volume to surge higher. Anything less I would pass on a play. If the breakout fails that brings the downside plays into perspective. Let them develop and be prepared to play either direction short term. My expectations are for a break to the upside on pure emotions and momentum versus logic. That means tighter stops to manage the risk of any plays.

The longer term view of the index is still questionable. The NASDAQ has been the clear leader to the upside and I would look there for clues on what will happen. I would expect a muted upside over the next six weeks with the quarter coming to an end, earnings still a question mark and the economic data not exactly instilling confidence in future growth. Thus, longer term be very cautious and use tighter stops than normal.