Tomorrow and the Next
The S&P rallied 29 points on Tuesday to close at 1263. The move followed Monday’s light volume selloff that completed a 61.8% Fibonacci retracement (1200 low to 1291 high). The market remains very volatile and the charts are not painting a clear picture. At first glance, the rally off 1200 looks healthy, with 3 days of light volume consolidation followed by a nice move higher today. However, the way the markets are swinging back and forth (i.e. 8% rally in financials today) is not the type of sustainable action bulls want to see. After two consecutive wide trading range days, the market needs to pause or pullback slightly. Then, we can talk about a push higher to retest 1291, or perhaps a move towards the descending 50 moving average. However, if the rally continues tomorrow, watch out for heavy resistance at 1291 and a possible reversal. Remember, oil inventories come out at 10:35am tomorrow, and we have the important jobs report on Friday.

SPX Support Levels
1226 ~ old support
1200 ~ intraday bottom made 2 weeks ago

SPX Resistance Levels
1263 ~ resistance from earlier in the month
1291/92 ~ major resistance

Over the Next Week or Two
The market looks poised to begin a counter-trend rally towards 1370, but one last shakeout might be required. Be cautious over the next few days. If you are building a long position, keep it small in case we retest 1200. Patience and discipline have never been more important.

After That
The S&P is in a bear market, and all rallies must be viewed as counter-trend moves. The long-term outlook is dependent on the price of oil and developments in the credit markets. High energy prices are probably here to stay and it will take time for our economy to adjust. The financials and housing sectors are not out of the woods. The financials will not bottom until major bank failures come to fruition.

The Market Outlook is updated as the charts fill out and provide more clarity.