On The Fly: Weekly technical notes for S&P 500

The S&P 500 (SPX) is in an upward-biased mean-reversion mode that has taken price right back to what was key support at 2380, but is now resistance. If the old adage of markets existing to provide "maximum frustration" is true, we are at a technical threshold that could leave bears without a leg to stand on, or alternately, void support for the bulls just as they believe they've taken back control of the tape after a savage week. "Maximum Frustration" would be a close just above or below this threshold, with an uncertain Monday ahead. Each side might then believe they are on the right side, only to quickly forget how we got here. Levels themselves are not particularly relevant. It is how traders behave at those inflection points that really matters; they are markers of sentiment more than anything. Collective trader psychology is a longer-term function of price and time, and whether one is on the correct side. Had the bulls not tried for a punt higher, it would have been very surprising. Equally interesting however has been the relative silence of the bears in the face of a not insubstantial victory. It is possible that the silence is because neither side was properly positioned for the downside we got. We may see position shuffling and churn today if that is true . For today, a close lower might sap the bulls of confidence. Unless it was a decisive push lower, though, it might equally be a trap for the bears come Monday. The reverse conditions - a further push and close higher now - would leave the bears out in the cold and the bulls perhaps far too confident of an easy week ahead. As of now the key levels of concern are at 2390 for the bulls and for the bears at 2365 or lower.