On Monday the bulls dug in deep and decided they were going to push the market higher. They did…every day of the week. Thursday was the test of the bulls as the S&P 500 was at resistance and the bulls passed the test by opening the S&P 500 higher and continuing the advance throughout most of the day. Friday was perhaps the weakest day of the week because the bulls were not able to get price above Thursday’s high for the day, but the bulls were able to close the S&P 500 by a small amount. The S&P 500 finished the week up 1.43%.
The bulls certainly controlled most of the price action this past week. The follow through on Friday was relatively weak, but the bulls are sitting in a good position for another charge higher over the next couple of weeks. The bulls have 7 consecutive bull bars which has formed a strong momentum breakout on the short term. Markets move from trending to flat and repeat the process over and over again in different degrees. Both flat and trending markets can be broken down further. For example, trending markets trend in different degrees…a strong momentum breakout, tight bull channel, or broad bull channel. The S&P 500 is currently showing signs of a strong momentum breakout market on the daily time frame. This can suggest higher prices ahead.
The breadth of the market picked up with price over the past week. It is not as strong as one would like to see if they are a bull, but at least it improved. For example, you can see the chart below how when the S&P 1500 broke to new highs back in November of 16, breadth really picked up. As the S&P 1500 broke to new highs this past week, you can see how breadth has not kept up with price.
This suggests that less stocks are participating in this recent breakout. Of course, the market can go higher, it is just better for the bulls if there are more participating stocks rather than less.
The big economic data this week are the employment numbers scheduled for release on Friday before the market opens at 7:30 CST. The numbers are expected to be relatively strong.
The short and long-term trend is up. The past 7 days of trading shows the S&P 500 in a strong breakout mode. This could reverse, but right now the bulls are in control. Market breadth is not as strong as a bull would like, but at the end of the day, price is king…not an indicator. We will be watching closely to see if the market can continue it’s advance into this short trading week or if the bears will halt the progress of the bulls and pull the S&P 500 down. Have a great week and great Memorial Day in honor of all those that have and continue to protect us and our freedom!
by Adam Straseske, CMT