Have you ever seen such an obsession over a certain level on the S&P 500? Oh, I suppose we have before. I remember, in August 2010, when 1040 was all anyone could talk about. But the fuss that has been made over this level is unreal to me.
Just in case you've been hiding in a cave for the last few months, the level is couched between 1260 and 1270. You can probably recite the reasons on your own, but let's list them anyway. The 200-day moving average, at 1259, lives up there. So do the recent highs -- all lower highs, I might add. The resistance, or downtrend line, is situated here, as is last year's closing price on Dec. 31. Further, of course, the now-much-talked-about triangle pattern has found its upper line there. Did I miss anything?
Now, let's stop obsessing over this level for a minute, because the NYSE managed to eke out two more stocks making new highs than it did back in late October, when the S&P was 30 points higher. I admit that I was skeptical this could happen.
Still, before you settle back and entertain thoughts about a new bull market, take a look at cumulative volume, and notice that it has not yet surpassed the late-October high. The good news is that, in order for it to top that high, net volume (positive minus negative volume) would only need to rise by 750 million shares. If the S&P rallied 30 more points and that didn't happen, it would be a real problem. In fact, that would shock me.
In addition, while breadth has been pretty impressive this week, the McClellan Summation Index has been less than stellar, having only managed a minor turn upward in the past two trading days. If this is to become a positive indicator, it will need to do better than it did in the late-November rally. Right now it's leaning positive, but it's still quite iffy.
The last few times the S&P has come up to resistance, there was a window of time during which it wasn't yet overbought on the oscillator. Now look at what it has done: It's milled around with a minor upward bias and refused to break out. In other words, it wasted that opportunity. The window is still open, and by my calculations it should remain open on the short-term oscillator until the end of next week. So, once again, this is its chance.
It would not surprise me to see a down day Friday. Perhaps the market will gather some shorts, and then rally again next week. Of course, a gap higher, above this resistance level, would probably be the least expected thing the market could do. For now we'll just note again that the window is still open, as the market is not yet overbought.
I wish everyone a very happy holiday and all good things in 2012!