Peter Lee, Chief Technical Strategist at UBS in New York, says that we are probably in the “Mania” stage of a stock market bull rally – the final phase of an uptrend where greed turns to delusion and eventually presages a turn in the market. Lee thinks that if he is right, the major turn will happen in 2015/2016.
In the short- to medium-term, Lee notes that the SPX has been choppy over the past three months and has remained within a well-defined trading range between 2040 and 2135. A breakout above this range will signal the next sustainable rally towards 2213-2221, possibly during this Summer and can set the stage for a Pre-Election Year rally.
Lee says that key initial support is now at 2040 to 2072 coinciding with: The March/April/May 2015 lows; the 150-day/200-day moving averages; the short-term March ’15 uptrend; and the 38.2% to 61.8% retracement from the February to May 2015 rally. Violation of this support zone would warn of a decline to 1961-1984.
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