July 13, 2011 | 10:30pm ET

In the Heat of Battle

After nearly tagging the upper end of its multi-month trading range seven sessions ago, the S&P has settled the week back down near the middle of its range. Friday closed the week with an inside compression bar, which could set the stage for some fireworks early next week.

The S&P has given back 50% of the rather impressive advance from its mid-June 1258 low. It is now critical that S&P bulls muscle the index back up above the 1356 level. Failure to do so in the next ten sessions or so, will place the index at risk of retesting and possibly breaching the lower end of its range.

Though our proprietary trend signal bias is still bullish, the market remains range bound between 1249 and 1370 over the near to medium term. Victors of this multi-month sideways battle will celebrate upon a 120-point expansion or a 120-point contraction of the current range.

Longer-term, bulls will celebrate the spoils of this skirmish round about the 1490 handle, or about 13% north of current levels. Their bearish opponents will collect their bounty down around the 1130 level, which equates to a 14% decline from this weeks close.

So long as both contingents are generally successful at defending their respective range boundaries, the battle will continue. Right now, this particular battle is dead even.

Technically Speaking Video

I trust and hope that you have extracted something of actionable value from this edition of Technically Speaking.

Until next time,

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