The S&P 500 started the week on shaky ground, but the bulls managed to push the S&P 500 into new high territory by the end of the week. Each time the S&P 500 has looked like it wants to give up, the bulls come in and bid prices back up. This is why it is important to have a solid game plan in place so that if you’re picking the highs, you’ve got a strategy to get back in.
Not only was it the end of the week, but it was also the last trading day of September. This gives us the final monthly reading of momentum for the determination of bull and bear market territory. As you know, we are not even close to being in a bear market stance. The S&P 500 just made new highs, small caps just broke out of their trading ranges to new highs, and many international markets are also running. The All World (ex-USA) Index is slightly under the S&P 500, but when you look at the actual vehicles we use, the S&P 500 is slightly under-performing on a 12-month rolling basis. So it pretty darn close to a tossup of the better.
The breadth of the market has moved closely with prices and is in overbought territory. This would typically signal at least a stall in prices, but this last week price did not stall unless you count the first two days of the week as stalling. We are now in the same predicament as we were at the beginning of last week. The only difference is that prices are fresh highs. The best readings lately have been when the oscillators are in an oversold position which makes sense in an upward trending market. The next clue could be a decrease in breadth which would signal another stall or pull back, so we will be watching closely for a loosening of correlation.
The big economic news this week are the Employment Numbers. Overall, the long and short-term trend of the S&P 500 is up. Prices continue to hold at support and advance on to new highs. We will be watching this week to see if price can continue into unexplored prices or if they start to drift back down into the recent trading range.
by Adam Straseske, CMT