Recently, the S&P ran out of steam when it could not remain above the 17 day moving average. With the Williams Percent R indicator showing a strong overbought indication on Oct 4th, the S&P has pulled back to its 50 day moving average. At this point, while the underlying technical behavior and slope remain positive, the recent overbought indicators have us cautiously awaiting to see if support can be gathered at the 50 day average. If support at the 1420 level is broken, then there is a substantially increased probability of a continued pullback to the 200 day average, or around 1370.
While the recent Fed action has breathed new life into the market, this new earnings season, kicked off by Alcoa's earnings report on the 9th, will weigh heavily on market direction. If we start to see more misses and inline reports vs. beats, we can expect more trouble ahead. A bunch of positive reports, and we could well see the S&P touch 1530 to 1550 before year end.