Despite having spent a tense 12 hours looking over the edge of the cliff Monday and Tuesday, the S&P 500 managed to close above the August low yesterday and keep its 2-1/2 year pattern bullish - see Figure 1. While it's still only mid-week, and volatility remains inflated a move back above Monday's high of 1133.50, according to IBTRADE Chief Market Strategist Jay Norris, would go a long way in alleviating the bear pressure and put speculators who shorted it over the last 3 days underwater.


E-MINI S&P 500

Since the launch of QE I in the late winter of 2009 not only have financial markets such as the Euro and Aussie shown a 80 plus percent correlation to the S&P 500, so have commodities such as crude oil and gold. The S&P 500 is the alpha market right now, according to Norris, and that isn't about to change just yet.

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The S&P 500 is in fact an influential index and widely seen as a proxy for the global economy. Given the follow the leader nature of traders and markets a recovery now for this influential index would have a far reaching affect across the financial and commodities markets. There are always two sides to a market though, so a failure of the current day old rally could shift the direction of so many markets lower again. As long as the S&P 500 futures stays above 1075, according to Norris, the bears can't get traction.