As seen below, the S&P 500 is making another attempt to overcome the convergence of a downtrend line (red line) from the 2007 peak and a resistance area (green line). This is the second time the S&P 500 will attempt to overtake this trend line after testing it on September 23 and then falling by 5,57%.

We will watch the action closely early in the week to see whether the index can surpass this level. If it can't, a minor double top may come into play. The first support level below the S&P comes into play near 1 022 then 1 000.

Sentiment surveys, such as the American Association of Individual Investors (AAII), are still neutral and doubting as opposed to overly bullish and embracing. Since by and large investor sentiment remains sceptical, while sideline liquidity still remains relatively high, we believe there is a good chance the S&P can take out this trend line and work higher.

Sentiment, both measured and observed, has served us well in calling market direction. Thus, given current readings of sentiment, we remain constructive, though respect the significance of the trend line as a potential supply area.