The market (S&P) shot higher today and then muddled around the 1510 area. Overhead resistance looks strong at the 1515-1518 area and another push to that area should make for a decent short-term fade.
The late day move below 1510 could be a sign of things to come over the short-term (1-5 days). I would not be surprised to see a test of Friday's lows by the middle of next week. As I stated last week "since the low established in July 2006 the S&P (SPY) has been higher during expiration week 10 out of 11 times. If the market lives up to its recent historical precedent I would expect to see the historically weak period of post options expiration kick in."
A move below Friday's low and the market could be witness to a wave of selling. During the last correction (Feb. 27th) the market moved sharply lower, bounced, tested the lows again and then began the move to new highs. This is typical in a bullish market so a break of this trend could be a warning sign of things to come. However, it is June and if we do see a push higher I would not expect the move upwards to be nearly as fast as last time. As my loyal readers know, I expect to see a trading range over the summer months and firmly believe in the "sell in May and go away" theory particularly this year.
Overbought/Oversold levels for June 11, 2007
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SPY - 44.7 (neutral)
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DIA - 43.8 (neutral)
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IWM - 44.0 (neutral)
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QQQQ - 45.0 (neutral)
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GLD - 36.0 (neutral)
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OIH - 53.2 (neutral)
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Andrew Crowder, Chief Investment Strategist,
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