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

Looking ahead for the week, the S&P 500 (SPX) was very close to breaking out above the 2800 area and it did so on Friday. The last time price was at or above this psychologically important round number, it only managed to trade for a couple of weeks above it before a sharp correction took place. Since then the index has been in a corrective phase that has gone on now for nearly six months. If forthcoming earnings and outlook are sufficiently strong to push the index back above 2800, there are only two resistance levels to note; the 2840 area and then the life high at 2872.87. A breakout in the coming week above the old high would go a long way to calming frayed trader nerves. Equally, if the index fails to break out or does so and falls back under 2800, it will cement that level in traders' minds as major resistance, in all probability to be sold rather than bought. That would put the 2700 area in play as a potential test of support once again. Keep in mind that this particular earnings season is unusually compressed, with the bulk of earnings coming out in a period of just three weeks. If the reports are uniformly bearish or bullish, that may be the easier part. We could see a very volatile set of price swings if there is more differentiation in reports either on the company-specific level or in terms of groups and sectors.