Obviously, the institutional changes we’ve seen over the last quarter are vitally important, but I think as we approach next week’s holiday break, it’s equally important to take a quick look at where we are, and where we’ve come from. Albeit at a weaker rate versus international/emerging markets,U.S.broader markets have enjoyed a tremendous run from their March 9 lows of roughly +65%. The last several weeks of the calendar year will likely prove to be a major inflection point, as all three broader indices are currently facing huge technical hurdles.
As shown in the charts below, the DOW, S&P 500, and Nasdaq are all currently teetering below their respective technical resistance levels. In times of normal economic growth, traders will typically look to break above these resistance levels to continue bull runs. However, with rampant skepticism surrounding the validity and sustainability of our current run, traders may look to pull the rug out from underneath the markets. Traders will be keenly watching the following nominal price levels: DOW 10,500, S&P 1,150, and Nasdaq 2,200. Perhaps more importantly, key metrics also to be followed are: Dollar index falling below $72 (currently at $75), Euro rising above $1.50 (currently at $1.48), and Oil rising above $80 (currently at $79).
If the aforementioned levels are decisively broken, trading volatility may quickly pick up, leading to large price swings in the market – much like what we saw in late 2008/early 2009. I will continue to keep a close eye on these levels, and let you know if any meaningful activity arises.