The S&P 500 in retreat
After the pullback following the three top attempt in June and July, the S&P 500 made another go at it. A fierce attack by the bulls in the week before last was halted on the Monday, 15th of October last week, when the Friday’s candle was almost completely engulfed by the Monday’s candle body. This strong engulfing pattern showed that there was a possibility of a pullback, a pullback that materialised during the week. On Saturday the 13th I was discussing the possibility of the index and said that the resistance needed to breakthrough was quite heavy and we would need a strong market to do that. Then I asked, if the market was strong enough, and I got no answer, just a disbelieving look. Then the following week showed that the market was not strong enough.
The point to look at from today, is the support area that was formed during the last pullback of the index. It’s crucial that it holds 
for the S&P 500 to have a change for another go at the resistance that has held so well. The market needs to be strong for the next go at it, but any negative moment can be fatal.
I don’t know to what extent we can use the strategies and tactics of warfare when analysing market environment, but as a description of the battle between the bears and the bulls, some metaphor can be used. As such, we have to admit that the bulls have had a though time following their advance, and the resistance in the last highpoint of the index has been severe. After the first initial attacks, the bulls had to retreat and recover their strength for the continuing of the attack at the top. This attack faded out as did the others and now the bulls need to pull back and regroup. It’s vital that the bulls gather their strength before the next attempt, otherwise it will be destined to the same defeat as the other four attempts.
The success of the S&P 500 is based on the economic confidence of the market players and low confidence will bear no fruit. If the upcoming support area wont hold, the S&P 500 could be in for a long pullback, that could last some months. This kind of pullback would not be beneficial for the US economy, or the world economy as a whole.
