The Unexpected

Just a short time ago the S&P 500 index closed above 1400, a move it's made several times over the last decade or so. The first time it closed above 1400 was July 9,1999. Looking at a chart, the S&P 500 formed a classic M-shaped top in late April-May before dropping down to its 200-day moving average support area of 1282. Less than a year ago the S&P traded well below its 200-day moving average, making a classic W or inverted-M double bottom at the 1100 level. The end of May just might be signaling a big move below the 200-day moving average. It's for sure no one knows what the upcoming summer will bring investors. Pessimism is high,especially over Euroland. However well-deserved given Europe's ugliness, a rally could be in the offing even if the index breaks below the 1200 level.