We’ve Hit Long-Term Resistance, Now What?

Well yesterday was a tough day. Not only because of the weakness in equities and precious metals but with the tragedy in Boston. It’s unfortunate that we must be reminded of the dark world we live in and the unfair pain humans inflict upon one another. My wife was born in Boston and our thoughts and prayers go out to those impacted by the blasts.

Recently I’ve tried stripping away some of the noise and looking at just price action. Today I want to focus on the monthly chart of the S&P 500 ($SPX). With the recent breakout high we have run smack into the slightly rising trend line that connects the 2000 and 2007 peaks. I had said I’d be surprised if we didn’t at least hit the 2007 high, but when long-term resistance like this is hit it’s unlikely to break on the first attempt.

So now what?

The last time we were at these levels we saw a period of multi-month consolidation. We can’t know for sure if that’s what we will see for 2013, but we will look at market internals to get a better idea of where things might be headed. Momentum (RSI Indicator) is still rising and has yet to diverge – which is one positive for a continued move. What’s important is to take the step back and see the long-term resistance and not expect the market to power through it on the initial approach.

I’ve had an internal fight about whether to bring this up or not… Looks like we had a Hindenburg Omen trigger yesterday. I could be wrong (wouldn’t be the first time), however it seems ZeroHedge picked up on it as well. I last wrote about a possible ‘sighting’ of the Omen last summer. I found out that I was misinterpreting a portion of the Omen’s criteria and that the Ominous Omen did not in fact trigger. Although, the part I got wrong last year, I believe is correct in trigger right now. Does it Matter? Many would argue it doesn’t. ZeroHedge is looking for another trigger to create a cluster, like we saw in October 2007. I’ll leave you to come up with your own take on the Omen’s validity.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.