The S&P 500 continued the upward movement last week and ended up 1.37%. The week did start off slow as the bears pulled the S&P 500 down on Monday and the beginning of Tuesday, but by Tuesday afternoon the bulls were in full force and continued with buying pressure until the close on Friday. On the S&P 500, this is the first test of the high from the last pull back. So as at ended this past week, we are sitting right at resistance from the last high.
This week was also the close of the month. From our indications, there were very few trend sell signals given from the monthly close. This doesn’t mean the markets aren’t topping or we are not at the top of the market, it simply means the bulls are winning right now with regards to the longer-term trend. The S&P 500 and All World (ex USA) index both comfortably finished above treasuries leaving us out of bear market territory. The All World index is still stronger when you measure the tradeable vehicles we monitor.
The breadth of the markets increased with price this last week after the for-mentioned falter in price. There are no divergences or reversals worth mentioning. The only thing jumping out is that both oscillators measuring breadth are close to overbought territory. If the S&P 500 is to remain range bound, the overbought signals represent the top of the trading range. If the S&P 500 breaks to new highs, we will be looking for breadth to follow through strongly. If it does not, it could represent a weak breakout and fail shortly after the breakout. There aren’t any major economic reports we monitor on the schedule for this week.
Overall the short and long-term trends are up. We are sitting at resistance on the S&P 500 so it will be an interesting week to see if the bulls can continue marching higher. Almost all our stops are relatively far off and many have second purchase price ranges scheduled. We are still looking at the Australian index as it is akin to the S&P 500 with regards to being range bound and at the top of the range. The difference is that the drops in price have been null compared to the S&P 500. This is a sign of strength. Have a great Labor Day!
by Adam Straseske, CMT