When $SPX broke out to new all-time highs in early June, it seemed labored, and that breakout quickly faded. But now, in late June and early July, $SPX has moved to new all-time highs with more authority -- having closed at a new all-time high for the sixth trading day in a row.
The broad market ($SPX) has failed to convincingly break out to a new high, and now it is back below the old (early May) highs of 4238. A close below 4190 would indicate to me that the attempted upside breakout had failed.
Despite recent market weakness over the past four days, the equity-only put-call ratios remain on buy signals. The standard ratio (Figure 2) flattened out yesterday, but the weighted ratio continues to drop. These ratios will remain on buy signals as long as they are declining.
The stock market has run into considerable resistance at the top of the trading range, as it appears to be consolidating for a violent move either an upside breakout to new all-time highs, or a failure at the top of the range, leading to a swift retracement to the bottom of the range (4060). Since May 24th, $SPX has not closed above 4208 nor below 4192. That is an extremely narrow range, considering the volatility that has been displayed since February 2020.
Stocks continue to push higher, towards the all-time highs at 4238. The pace of the advance has slowed, but there has been some improvement in the internal indicators that paints a more bullish picture in that regard than we've seen in some time. However, if resistance at the old highs holds, then there is a distinct possibility of a retest of the lows of this trading range, at 4060. A move to new highs or a drop below 4060 should propel a stronger move in the same direction as the breakout.
The S&P 500 Index ($SPX) made a new all-time high on May 7th. Since then, a correction has been underway, and there have been several times in the last week when I'm sure that both the bulls and the bears thought they had taken control. There were two rather violent declines, both terminating near the 4060 level, so that is now the first support level. Both of those declines were followed by furious rallies back to the slightly declining 20-day Moving Average. A breakout from the current range should see follow-through in that same direction.
On Friday, May 7th, $SPX broke out to a new all-time high and so did the Dow ($DJX). However, after an early Monday morning rally, things reversed badly, and $SPX dropped sharply for the first three days this week, losing a whopping 173 $SPX points.
But there was no follow-through the next day, and in fact $SPX has rallied strongly, regaining the 4120 level and more.
From early March through mid-April, $SPX was on a tear. Since then, it went mostly moved sideways, while establishing a support area near 4120. Now it's broken out to the upside again. Below 4120, there is support near 4000 (the March highs), but that is an area that was never tested, since $SPX just blew right through the March highs on a double gap move higher in early April. Finally, the support at 3850-3870 is still important, for that is the area from which the current leg of this rally was launched.
The pace of the market's advance has slowed from the torrid run that it had between March 26th and April 16th, but $SPX is still making new all-time highs almost every day.
$SPX has three major support levels, all noted with horizontal red lines on the chart in Figure 1: 4120 (which is the daily lows of several days during April), 4000 (which was the March high), and 3850-3870 (which is the area from which the current leg of this bull market rally emanated on March 26th.
After reaching new all-time highs a week ago, the market has stumbled a bit this week. The overbought conditions are beginning to take a toll, but the overall trend is still bullish at this point.
There is support at this week's lows roughly 4120, with stronger support just below 4000 (the March highs), and the major support at 3850-3870. If 4000 is penetrated that would be a short- term negative, and if 3870 is penetrated that would be a major change of trend.
