With futures off their highs this morning, and tepid earnings reports from some major S&P components, notably IBM, we need to be especially aware going into this week of potential reversals. We tested minor resistance in the 1895 area on Friday, but failed to hold at those level, and closed off the highs.
If we manage to take out Friday’s highs this morning, its a short hop higher to the real test at 1906, the 200 day moving average. If we can move above that, we have a clear shot a filling the gap all the way to the 125 day moving average around 1946. A move lower this morning, however, opens up a potential retest of downside support in the 1840s. As always, we will be mindful of any trend development as an early indicator of directional inclination.