Technical Talk: Trends still remain up on the S&P 500 as index hits 100-day moving average …

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The comments below were provided by Kevin Lane of Fusion IQ.

The S&P 500 recently took out a resistance area (see chart below) near 1,115. The 100-day moving average (1,128) and the intraday highs near 1,131 stand in the way of a deeper breakout to the upside.

Near term the seasonal summer strength and the oversold rally continuation are the main trading themes. Many believe the ral­ly is predicated on a secondary stimulus package being tossed around Washington. Either way, the path of least resistance for now remains up and dips have been shallow. Investor sentiment remains dour (only 30% bulls in the recent AAII survey) and has helped stocks move higher as investor sentiment tends to be a great contrary indicator. The old saying is that the market exists to confound the majority and reward the minority, and certainly the majority lies in the skeptical camp.

That said, near-term momentum still remains up and until we get a dramatic shift towards negative internals traders are best re­warded with long strategies, albeit with reduced exposures and not full investment. The glaring negative is that the move up has been on light volume.

As seen above the S&P 500 has worked back above resistance in the last two sessions (red line) and remains in the context of a minor up-sloping channel (purple dotted lines). As long as the index stays above the lower channel line near 1,115 the bullish trend will remain in place.

Source: Kevin Lane, Fusion IQ, August 5, 2010.

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