S&P 500 tests 2007 high

By Colin Twiggs
March 25th, 2013 5:00 a.m. ET (8:00 pm AET)

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The S&P 500 continues to find support above 1540 on the daily chart. Breakout above 1565 would signal another advance. A higher trough on 21-day Twiggs Money Flow would indicate medium-term buying pressure. Breach of the rising trendline is unlikely at present but would warn of a correction. Target for the current advance is 1600*.

* Target calculation: 1530 + ( 1530 - 1485 ) = 1575

VIX Volatility Index remains near its 2005 lows at 0.10. This does not offer much reassurance as volatility can rapidly spike. Breakout above the quarterly high at 0.20 would be a warning sign.

Bellwether transport stock Fedex dipped below $100 after an earnings disappointment. Reversal below the rising trendline at $85 would warn that the broader economy is slowing.

The Nasdaq 100 continues to struggle with resistance at 2800. Declining relative strength against the S&P 500 illustrates how blue chips are being favored over tech stocks. Bearish divergences on both 13-week Twiggs Momentum and 13-week Twiggs Money Flow warn of another correction. Reversal below the latest rising trendline would strengthen the signal. Follow-through above 2900 is unlikely at present, but would signal an advance to 3300*. Only breach of primary support at 2500 would signal a reversal.

While there are structural flaws in the US economy, the market is gaining momentum and the current advance shows no signs of ending.

That which does not kill us makes us stronger.

~ Friedrich Nietzsche