The S&P 500 gapped higher Monday and closed off the high, but the strength was great enough to push the S&P 500 almost to the highs posted about a couple months ago. On Wednesday, the bulls gave it everything they had, but could not hold on and the S&P finished off the highs and lower. Thursday was a neutral day and Friday was owned by the bears.
The bears stopped the bulls on Wednesday and showed power on Friday. The bears ended the week with a bear bar and have set up what could be a double top. The bulls did break the bear channel (bull flag) we’ve been referencing, but failed at the top of the larger sideways channel. The top of the channel is referenced by the orange bar on the top of the chart. The bulls are looking for a reversal bar and then higher prices while the bears see this as a double top and possible move to the bottom of the channel or further. Neither seems to have dominance at this point.
Breadth is still mixed. It is not giving us much to work off of. As the market has stayed flat since March, breadth has failed to break out higher as well. Breadth is basically moving with price which is not what gives a good indication of future prices. The bulls may look to the increasing breadth since early to mid-March as a sign of hope, but it is a relatively weak signal at this point. It is a pretty big week for economic data. We’ve got the New Home Sales data coming out on Tuesday, the FOMC Minutes on Wednesday, and US GDP on Friday.
The long-term trend is up and the shorter-term moved to up as well but has stalled. Even though the bears halted the bulls at the end of the week, the bulls are still in a good place to break out to new highs if they can muster up the energy. We’ll be watching the trading range to see if we can get a decisive break to the upside or if the bears will dominate this week and pull the S&P 500 lower into the sideways channel.
by Adam Straseske, CMT