No surge or purge worthy of drama finished this holiday-shortened week; but it was interesting in a few ways. First technically, as S&P remains above breakdown levels (barely approached twice in the past week) but not above resistance, which is the former support in the Sept. S&P 2030-40 zone. 

Second geopolitics; where there’s no clear plan to deal with North Korea; at the same time there is clear mutual interest in going forward with Russia, in at least several ways. 

 Daily action did not dip before the expected (crucial) rebound; but simply moved up and then mostly sideways for the rest of the session. 

That’s fine with respect to retaining a bit of stability looked for anyway (very clearly it’s on a rotating basis with alternating rallies, declines and rallies). It is not so impressive when one contemplates the backdrop concerns, which haven’t changed at all from prior discussions. 

Bottom line, nothing has changed in our view of risk. It’s easy to say if S&P fails to go up, it could go down. Obviously a thrust above 2450 basis Sept. would panic shorts and run it up a bit; but again that would likely be a sell. For the moment the market needs to first establish a viable move back into the 2330-40 area or it’s a moot prospect.
 

Conversely, a drop below 2400 has significance since it’s been probed now a couple times, and the entire affair above that area has been a distribution phase for many stocks and sectors. (Without a rebound in Oil and tech; it’s hard to see how they get the short-term bullish alternative going.)

And you know our view that if (at any point in the days or weeks ahead) we do break below 2400 (and we suspect that is the odds-on favorite to occur), the S&P ‘might’ try to hold 2360-2380 and bounce but again that would be a sequential (stair-step lower) move to a lower rebound higher before prices proceed to lower levels. The risk is of more aggressive selling ensuing with an algo-triggered ‘trap-door’ style event at some point.