The S&P 500 finished the week down .3%. On Monday and Tuesday the bears mostly controlled price action. On Wednesday, the bears were able to pull the S&P 500 lower, but they were not able to keep it down as the bulls created the buy signal bar for the week. The bulls got their buy on Thursday, but the follow through was lackluster. On Friday, it looked like the bulls were going to advance prices for the week but the bears had other plans as they took away the bull’s hope right around lunch time.
This past week’s price action was that of sideways movement. The market is either trending up, down, or moving sideways. You can even dive a litter deeper into your analysis and diagnose each bar as a trend bar or sideways bar. The difference between the two is the height of the body verse the tail of the candle. If the body doesn’t take up at least 50% of the total bar, it is a sideways bar. Markets tend to have inertia just like an object in motion stays in motion or an object at rest will stay at rest. Right now, the S&P 500 is at rest between support of the last breakout and resistance of the last high.
Market breadth is neutral to bearish. There is a slight negative divergence in the longer-term breadth in the New York Stock Exchange.
The shorter-term breadth in the S&P 1500 has moved relatively close to price which does not give a lot of guidance to future prices.
It is a big economic week as there is a major report (or reports) on Tuesday, Wednesday, and Friday. The Producer Price Index, Consumer Price Index, FOMC meeting announcement and Housing Starts are all scheduled for this week. A quarter point rate hike in the federal funds target from 1.00 to 1.25% is expected by many analyst. This or any of these could be sited as reasons why the market moved.
The long-term trend and short-term trend is still up. Recent support was tested on Friday and held right after the bulls failed in a breakout. This leads up to an interesting week as this could be a final flag prior to a deeper correction or the bulls could continue their advance. We will be watching the for-mentioned support levels and price targets to see how price behaves at those levels.
by Adam Straseske, CMT
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