The broad stock market has broken out over major resistance at 4170 and should now be ready to challenge the 4300+ level. It is imperative for the bulls that these recent gains be held. That is, if $SPX were to slide back below 4170, that would be modestly negative, and if it fell below 4070, that would be extremely bearish.
Stocks have continued to rally from the June lows, with the rally picking up steam over the last three or four weeks. But now it has run into the heavy resistance area of 4070-4170, which was initially established back in the early part of June. A clear breakout over 4170 would be bullish and would likely then call for a challenge of the bear market downtrend line at 4300+.
Stocks are continuing to rally, and for the first time in a while there is a pattern of higher highs and higher lows, at least in the short term. The major intermediate-term trend of $SPX is still negative (outside blue lines on the chart in Figure 1), but the short term has accomplished some objectives. For example, the gap on the chart at 4017 has been closed.
The downtrend lines are still in place on the $SPX chart, but the short-term outlook has improved greatly. the rally that began on July 15th seems stronger than most of the oversold rallies that we have seen so far.
But there is stronger overhead resistance above current levels. First, there is the gap, which extends up to 4017. Closing that gap would be a strong positive move. Then above there, the trading range from early June, at 4070 4170 is strong resistance.
Bears pushed prices lower all week, and the major trend of the $SPX chart is still downward (lower highs and lower lows, as denoted by the blue trend lines on the chart). However, most declines were halted before they got much momentum going. $SPX has found support in the general area of 3730 again, as it did at the end of June. The next support area is 3630 (the year-to-date lows). If that is violated, things could get ugly, with minor support at 3500, and then stronger support at 3200.
The blue downward trend lines on the $SPX chart (Figure 1) tell us that this is still a bear market (lower highs and lower lows). The halting rally that has taken place since mid-June has been pretty much of a disappointment so far.
There is support at 3740 (last week's lows) and then at 3630 (the year-to-date lows). As for resistance, the previous short-term rally failed at 3945, so that qualifies as resistance.
The latest attempt at an oversold rally appears to be over with very little to show for it. the rally barely reached the declining 20-day Moving Average of $SPX. Typically, oversold rallies overshoot that declining 20-day MA, so this was a particularly weak rally attempt.
The trend of $SPX is still downward, and the pattern of lower highs and lower lows continues to dominate the $SPX chart. In short, this is still a bear market.
The broad market made new lows for 2022 a week ago. That reaffirms the pattern of lower highs and lower lows on the $SPX chart, meaning that the bear market is still intact. There should some support at last week's lows, near 3650. Beyond that, one has to go to a longer-term chart to find support: 3500 and then 3200.
The oversold rally that began with a furor in late May appears to have run its course. $SPX traded in a 100-point range for seven days, before finally breaking down yesterday (June 9th). The red box in Figure 1 denotes that tight trading range. It now seems likely that $SPX will test the May lows, in the 3800-3900 range. A violation of that area would then see a new leg of the bear market beginning.
