S&P 500 Remains Flat Despite All Economic Data

The S&P 500 opened down on Monday, but the bulls stepped in closing the S&P 500 close to the highs of the day. The bulls carried the buying into Tuesday enough to close the S&P 500 at the top of the current trading range. It looked like the bulls were going to break the S&P 500 higher on Wednesday, but they could not hold on and the bears closed the market lower for the day. Thursday was the day for the bears to break out of the trading range but they were halted on support and the bulls pushed the S&P 500 higher for the remainder of the day. Friday was another day of back and forth with the bulls able to close the market slightly higher and after it was all said and done for the week, the S&P finished up a grand total of .06% after an entire week of trading.

 

 

The S&P 500 remains in a relatively tight trading range from about 2420 to 2440 range. The bulls are selling at the top of the range and buying at the bottom while the bears are basically doing the same thing. Neither party is willing to give that extra nudge to get out of the current range. The S&P 500 is still in a nice uptrend defined by higher highs overall and a nice bullish upward sloping channel. The last time the S&P 500 was trading like this was the early part of May (above in the orange box). The breakdown was sharp and filled the gap in price from April. If the S&P 500 falters, the first price target is the 2405 range and the 2400 range is about a 50% retracement of the last leg up. We would want to see how prices behaved around these price ranges.

Market breadth is basically flat just like price on a longer-term measurement of breadth. There is a small negative divergence in the faster breadth measurement of advances minus declines as shown below.

 

 

If breadth breaks to the downside with price, it could be a sign of a deeper correction ahead instead of the sideways corrections we have witnessed in the S&P 500 the last several times the market has gotten ahead of itself.

When it comes to the economics of the markets, New Home Sales numbers are scheduled for this Friday. The numbers are expected to ‘healthy’ but slightly lower than the past three month average. The big news last week was that the fed raised the Federal Funds Rate by a .25% to a target range of 1.00% to 1.25%.

The sideways daily trend is getting a little long in the tooth but could continue longer. We want to watch how prices act at support and resistance. The longer-term trend is still up and the shorter-term trend is flat as prices are smack dab in the middle of the range. The longer a sideways trend continues, the less clarity it gives to a breakout in one direction or the other. If prices break support and resistance and quickly fail, we will be looking for a possible break of the other side.

by Adam Straseske, CMT

Red Oak Financial Asset Management

Adam Straseske, CMT | BLOG: www.humbleinvestor.net

Phone (512) 971-1274  |  Fax (866) 730-2042

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