The market has continued to suck in its sideways chop fashion that leaves it barely in the green for the year as I write. Certainly the drama in Europe with Greece and a fear of rate hikes are taking their toll but since markets had barely made any gains this year on its own, it has little room to lose ground. A true correction would of course be a welcomed respite as it would allow for a future rally, but I am bracing myself for the possibility of something more ominous than just a healthy 5% correction. In reality, the market has been in a corrective state for the better part of this year, albeit a choppy, sideways one.
SPY is currently sitting just above $207 after having closed 2014 at $205.54 which is near the current 200 day SMA at 205.48. The index managed to bounce off of that 200 day which also culminates with a long term trend line from the 2009 bottom that touches the 2011 bottom and the 2014 bottom on a logarithmic chart. Although an Algorithmic chart allows for more room to the downside before losing support, this culmination of support levels with the 2014 close, the 200 sma and the trend line, tells me that this is a very important level...a do or die moment if you will. Should the index lose those levels, it will likely mean more downside for U.S stocks.
Now I keep in mind that this could be precisely where it recovers. It is common to see the bleakest moments turn on a dime in stock markets. Even more likely would be a loss of imperative levels just for a day or two to convince bears that their time has come to roar with gusto, only to be immediately followed by a strong recovery. Ms. Market makes it her priority to be fickle, so we will just have to wait and see. Should Greece make a deal, and with healthy numbers in the US economy, markets could get on the up train and ride gains to the end of 2015. Or we have a full 25% correction to the breakout level of 2007 highs.
Here is the weekly chart.