2nd Attempt of Bulls Fails

Monday started out great for the bulls. They were able to push the S&P 500 back up to the previous top. Tuesday was the day for the bulls to capitalize, show some strength and propel the S&P 500 into indisputable highs, but they could not do it. The S&P 500 closed down on Tuesday giving some hope to the bears. The hope turned to action and the bears were able to open the S&P 500 lower and pull it lower the entire day. Thursday and Friday were owned by the bulls but there were only able to get the S&P 500 to shorter-term resistance and were not able to close on highs either day. Below is a daily chart of the S&P 500.

 

 

The S&P 500 is in a trading range that it entered mid to late February. You can see it from the green lines above. The bulls had a great change to exit the range to the upside, but they could not. Now the S&P 500 is again at resistance, but it is resistance at a lower level showed by the red line. The last two weeks of price action have been bear bars on a weekly scale showing weakness of the bulls. The bulls still have price towards the top of the larger trading range, but they need to get moving if they are going to push the S&P 500 higher anytime soon.

Market breadth decreased slightly over the past week showing softness in the overall markets. As the S&P 500 increased in price, breadth basically stayed flat. This was a very minor divergence. If prices continue to bounce higher, the bulls will want to see a large increase in breadth to give confidence to the move higher.

It’s a pretty big week for economic announcements. New Home Sales numbers are expected for release on Tuesday. The FOMC Minutes are on Wednesday at 1:00 CST and US GDP numbers are scheduled for Friday morning. Any of these items could be sited as a ‘trigger’ for a market move.

The long term trend is still up and the short-term has moved to down triggered by the break in support of the 2380 range. We want to see if the bulls can quickly close the gap in prices from last week’s action. The level to watch on the upside is still the 2400 range and we are still watching the 2320 and 2300 ranges for support. This range action won’t last forever. The longer the range bound movement, the less pull the past upside move will have on a future move. We will be watching the levels closely.

by Adam Straseske, CMT

 

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