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The U.S. stock market finished modestly higher last week as the tech-heavy Nasdaq Composite and small-cap Russell 2000 set new all-time highs. The bellwether S&P 500 and Dow Jones Industrial Average moved back to the upper end of their recent ranges.  

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Although last week’s new highs by market-leading technology and small-cap stocks are certainly encouraging, almost halfway through 2015 the broad market S&P 500 is only up 2.5%. Critical resistance just above the market and underlying support just below it continue to get closer and closer together. This tightening trading range is likely to become the springboard for a new sustainable leg higher or the beginning of a very overdue corrective decline.

The two strongest market sectors last week were health care and consumer staples, while the two weakest were energy and financials, the latter of which was actually the previous week’s leading sector.  

Asbury Research’s ETF-based metric shows that, on a percentage basis, the biggest inflow of sector bet-related investor assets over the past one-month and three-month periods went into financials. This sector continues to show potential for more upcoming strength despite last week’s setback, especially with long-term U.S. interest rates on the rise.

S&P 500 Tests and Holds Support 
The stock market has been extremely difficult to navigate this year. This is due to volatile day-to-day price movement within a very tight trading range. In fact, the benchmark S&P 500 closed Friday at the same level it did on Feb. 20.  

When the price range of an index becomes compressed like this, it indicates temporary investor indecision that typically becomes the starting point for the next significant directional move. The question is, which way?

In last week’s Market Outlook, I pointed out important underlying support at 2,072, saying this was where the broader market’s larger bullish trend must resume if still valid. The index traded precisely down to 2,072 on June 15, stopped on a dime, and reversed higher to close at 2,110 on Friday. Heading into this week, the market’s overall positive trend remains intact.  

Beware of Formidable Headwinds in Tech and Overseas
Despite last week’s nice bounce from support in the S&P 500, this week my focus shifts to very formidable overhead resistance at 5,133 in the Nasdaq Composite. This is the high from the top of the tech bubble that I first discussed in the April 27 Market Outlook.

Major historic highs like this one are often broken slightly on a near-term basis as investors negotiate the area and trading volume surges. But they are seldom significantly and sustainably broken without at least a minor profit-taking-driven corrective decline first.

Additionally, the next chart shows that the Japanese Nikkei 225 index, which has been positively correlated to the S&P 500 for the past 15 years, is simultaneously testing major resistance at its 20,833 April 2000 benchmark high.  

These two long-term overhead resistance levels, in addition to recent weakness in other positively correlated overseas market like the London FTSE 100 (see June 8 Market Outlook) and Hong Kong Hang Seng Index, warn that even though the bullish trend in the S&P 500 is still intact, investors should keep an especially close eye on their portfolios over the next several weeks as these major levels are negotiated.

Put Gold Back on Your Radar
In the May 18 Market Outlook, I pointed out that the SPDR Gold Trust (NYSE: GLD), which moves with gold prices, was testing major overhead resistance at its 200-day moving average. I said a sustained move above this level would be necessary to indicate that a major bullish trend change was emerging.  

The next chart shows that GLD immediately reversed lower, collapsing into underlying support at $112.30 before rebounding back to the 200-day, now at $115.97, by the end of last week.  

Last week’s late rally sets up another major decision point for GLD from which its larger bearish trend should again resume if still valid. However, I don’t believe this will be the outcome again this time.  

My analysis of commercial hedger positioning in gold futures, according to the latest data from the Commodity Futures Trading Commission (CFTC), indicates that the smart money is making an aggressive bet that gold is undervalued near $1,200 per ounce, which is exactly where prices closed on Friday. 

This suggests we should see GLD rise and stay above its 200-day moving average on this most recent test. Should this occur, it would indicate a new buying opportunity in the yellow metal.

Putting It All Together 
Last week’s rebound from key underlying support at 2,072 in the S&P 500 suggests the broader market’s current bullish trend is still valid and intact heading into this week. However, formidable overhead resistance at 5,133 in the market-leading Nasdaq Composite, plus the threat of a bearish reversal in a number of positively correlated overseas markets, including Japan, England and China, warn that the global stock market is still vulnerable to a correction over the next several weeks.

Meanwhile, my analysis of the latest futures market positioning by smart money commercial hedgers suggests gold prices may be on the verge of beginning a meaningful advance. 

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This article was originally published on ProfitableTrading.com: New Buying Opportunity Emerging in Gold?​