A Market Looking for Support

• Since the long-awaited "correction" in October of last year, the S&P 500 has been struggling with higher levels of volatility as market participants (traders and investors) grapple with trying to justify current prices.

• While it has continued to make new highs, each new high has been followed by rather significant selling (resistance) as traders take profits and investors are reluctant to commit until prices reflect better value.

• Previous buying (support) since the October lows of 1820 has established itself at or about 1970-2000.
• Interestingly the 50 day moving average (which smooths out the day to day volatility) has turned lower indicating growing downside momentum (increased selling volume).
• A converging 50 day and 200 day moving averages can signal a more protracted correction.
• This could mean that previous support may be tested again in the coming weeks/months.
• If buying support finds these levels attractive it could indicate better markets to follow as most of the selling would have been removed from the market.
• If there is not enough buying support and markets break below 1970-2000, that would likely encourage another wave of selling (longer term investors reacting) and the next level of support may likely not be until the 1820 level.
• On the other hand, if support can hold at the 1870-2000 level, the next market objective will be to re-test the highs at or near 2120.

• There will be a good deal of economic data which will be closely monitored to assist traders and investors with their decision making and of course, efforts to understand how central banks will act in light of that data.
• As well, Q1 2015 earnings, which are expected to decline from Q4 2014 earnings, will also play a considerable role in determining if the S&P 500 is representing reasonable value.

If I had new cash to invest, I would be patient in putting that money to work. Just saying!

The views expressed are those of the author, Scott Tomenson, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.