Everything that happened this past week emanates from the fact that the 2910 did its job in capping the market. Last Sunday, Zenolytics put out a note saying that the buying window for equities was now closed, as 2910 was everything.
The high on Tuesday for the week was 2910. Even more significant, the high happened along the lines of a perfect time from a cycle basis.
The simple fact that the markets paused exactly where they should on the day that they should isn't enough, however. What we need to know is how the markets react to such symmetry.
From observing the market after the touch of 2910, there was an undercurrent of buying that was very obvious. The market wanted to rollover multiple times throughout the week and had every reason to do so given both technical and fundamental developments. However, every time the market started gathering some downside momentum, a wave of buying swept over the market like a cool breeze, calming those who had their fingers on the sell button.
This is significant in that it tells of one thing specifically: There are too many bears remaining in the market for it to move down without a severe, surprise fundamental setback.
The cool breeze of buying that kept sweeping over the market all week tells of:
- A majority of sellers who wanted out of the market already being removed from the picture
- New buyers steadily moving in
- A steady wave of short covering, following a painful start to June for the bears
As we move into a key Fed meeting this week, there are multiple reasons for bears to continue their short covering campaign until the Fed announces their decision. The threat of a surprise 50 basis point cut will likely start ringing throughout the financial media on Monday morning prompting some panic among the bearish camp.
Geopolitical instability couldn't take the market down this past week.
Semiconductors failing due to Broadcom's woes barely made a dent.
A very serious technical point of resistance simply resulted in a sideways market.
All of these facts are the equivalent of the market shouting that it wants to test 2910 again early in the week. Only this time around, 2910 will likely fall, with the advantage moving to the bull side until we see what the Fed has to say.
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