The S&P 500 finished the week up .63% by the close of Friday. The bears had the opportunity to pull the market lower, but they could not. The bulls were able to hold the S&P 500 basically flat on Monday, Tuesday, Wednesday, and Thursday. Each day the S&P 500 bounced around but ended the days basically flat. By Friday’s open, the bears had tried to pull the S&P 500 down to break support at least two times and failed. The bulls took advantage of that weakness and pushed the S&P 500 higher by .41% for the day.
When it makes sense for the market to do one thing and it doesn’t do it almost immediately, it’s a good sign that the market will do the opposite. At the beginning of last week, it would have made sense for the S&P 500 to go down since it was right at resistance and ending the week with a strong bear bar. However, after many days of back and forth, tight sideways price action, the bears could not break the trading range to the downside. This showed the power of the bulls and on Friday they capitalized. We will be looking this week to see if the bulls can break out of this wider trading range to the topside. The trading range has gone on since the beginning of March. It looks like the bulls will pull it off, but we will have to wait and see.
Both the shorter-term and longer-term breadth is still in line with price. In order for breadth to give us any signals, it needs to move out of line with price. Right now, it is saying that ‘everything is normal.’ The next signal breadth gives could be a negative divergence if the S&P 500 moves higher but many stocks do not move with the index. If price breaks to the upside this week, the bulls will want to see a strong surge in breadth as well to confirm the higher prices. It is a pretty light economic week. Producer Price Index and Consumer Price Index numbers are scheduled for release later this week.
The long and short-term trend is up. The bulls seem to have control as it stands right now. Each time they can hit the ceiling of resistance, it gives them a better chance of breaking to the upside. We are easily at the third strike so it will be interesting to see if they can follow through this time.
by Adam Straseske, CMT