S&P March futures have resistance at last week’s high of 1463 but we have the momentum to push through here this week and test the 2012 high of 1474. Being a yearly high this is significant and we should struggle here. However a break higher is very possible so if attempting shorts, we need a tight stop and will be looking to buy in to longs again in the expectation of further strength towards the next target of 1489. Above here we can then push on to 1503 and probably as far as 1511 to take profits on longs.
After such a big rally last week we are of course over bought in the short term. Failure to break last week’s high of 1463 could trigger some light profit taking therefore with 1450 and then 1444 likely to be seen. Watch for a bounce from here back up to the 1460/63 area. However longs will need a stop below 1438 as a break should see continued losses to 1432 and quite possibly to 1425/22 which fills the new year gap. Exit all shorts on the approach and buy in to longs here as we look for a low for any correction. We would expect to see a strong bounce from this point but as always we needs to use a stop, in this case below 1419.
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