S&P Is Hitting Key Resistance Around 1950

 | Feb 22, 2016 | 10:41 AM EST
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The natural inclination of my traders is to sell into, or short, a euphoric open like we have, this morning. The market is now a bit extended and is hitting key resistance levels around 1950 on the S&P 500. It has gone almost straight up, after hitting the 1812 low, and, even though it did rest on Thursday and Friday, the logic of taking some gains seems compelling.

What happens instead is that this sudden spike higher catches a large number of people with too much idle cash. They are painfully aware of how often we have had V-shaped moves in the past, so they aggressively look for entry points. If we fade at all after the open, they rush in and provide immediate support. The support is so strong that we never even go negative.

As you might expect, breadth is extremely strong at about 5 to 1 positive, but we only have about 80 new highs. New highs are still quite limited because the indices aren't even close to the highs of December. We have a very long way to go to produce the sort of V-shaped moves that took the market back to previous highs, and you have to be a real optimist to believe we can pull it off.

My main focus this morning is to buy some dips in precious metals. The group has already bounced substantially, but I believe that the recent momentum there bodes well for the longer term. My stock of the week, Silver Wheaton (SLW), is at the top of my list.

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