It seems that with every headline out of Europe the market cheers, then screams, then cheers again and maybe lets out a couple more high pitched yells along the way. But it is important to keep in mind that these cheers and screams are just coming in the context of a clearly defined trading range of which the S&P500 has been stuck in since early August. While we haven’t gone either way in the grand scheme of things just yet, there is a pretty clear trading range that has developed this week that we can follow. A breakout or breakdown above or below it will likely signal the next move.
We’ll focus on 3 major indexes: S&P500 (SPX), Russell2000 (RUT), and Midcap400 (MID). SPX has spent the last the last 7 trading days channeling between 1,190 – 1,230. RUT has done the same between 680 – 710. Lastly, MID is going back and forth between 820 – 855. Until we get closes above or below the top or bottom of each of these ranges it’s really anybodies best guess as to what the market does from here. That doesn’t mean we can’t be prepared though. Consider us bearish on a breakdown below the ranges and bullish on a breakout above them.
With no major U.S. economic data on tap every little headline out of Europe will be in focus. We’re curious to see how the markets react ahead of a much anticipated EU summit to take place this weekend, we wouldn’t be surprised to see a little risk come off the table though. Dover (DOV), General Electric (GE), Honeywell (HON), Schlumberger (SLB), and Verizon Communications (VZ) will close out the weeks busy earnings schedule.
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