chart: Pullback Time

By Danny @LunaticTrader
Markets are trying to catch their breath after the strong run in October. We may see another rally attempt this week, but I think we are going to get more of a pullback before stocks go higher again next year. With many indexes near their all time highs again a lot of investors will probably take some profits.
Let's have a look at the S&P 500 (click image to enlarge it):

Courtesy of @LunaticTrader

The S&P is bumping into overhead resistance in the 2100-2130 area. Technically the the fast Earl (blue line) is showing a bearish divergence while the slower Earl2 (orange line) is finally flattening out at a very high level. This is the kind of setup that normally starts a pullback of 4 to 6 weeks.
So, if stocks try to climb again this week it will be a chance to take some profits. Next week we will start a new lunar red period and I think the S&P will use it to retest the 2050 level.

Good luck,

Danny

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