"To double bottom or not to double bottom" asks BofAML's Stephen Suttmeier...
S&P 500 closes in on the big 1950 level
The S&P 500 gapped up once again and is knocking on the door of key resistance at 1947-1950 with the falling 50-day moving average near 1951. There are plenty of similarities between now and early-to-mid October, which was when the S&P 500 rallied sharply and broke out from a double bottom off the late-August and late-September 2015 lows on the move above 2020. The key level now is 1950 and a decisive push above 1950 is required for another double bottom in the S&P 500.
Mind the S&P 500 gap; below would suggest exhaustion
The S&P 500 has gapped up three times in the last five sessions. Continue to mind the upside price gaps, as they are nearby supports. Yesterday’s gap offers initial support at 1924-1918 and it would take a break below this gap to suggest upside exhaustion. The next gap supports come in at 1899-1895, which held on Friday, and 1871-1864.
And we are testing that gap now...
But this double bottom does not project the SPX to new highs
Unlike the double bottom off the late-August and late-September 2015 lows, a double bottom off the January and February 2016 lows would not project the S&P 500 to new highs.
As highlighted above, a decisive move above 1950 would put in a double bottom off the 1812-1810 lows and favor a continued rally. The first resistance is 1990-2025 with the falling 100 and 200-day MAs near 2000 and 2029, respectively. The double bottom would count up to 2085, which falls well shy of the 2135 high from last May. The double bottom from October projected to 2175, but the S&P 500 stalled well below that upside count, which was a bearish sign. The risk is that a double bottom breakout above 1950 could set up another lower high within the downtrend from last May and suggest another rally to sell.