The Standard & Poors 500 Index ($SPX) bounced strongly off of support at 2040 last Friday. That level remains strong support, with resistance at 2110.
Equity-only put-call ratios rolled over to sell signals last week, and while there was some flirtation with a new buy signal by the standard ratio (Figure 2), both of these put-call ratios are back on sell signals once again.
Bulls took charge early yesterday and kept the upward pressure on all day long. The strength of the rally changed the status of several indicators as well. So the 2040 area is reinforced as the major support level of $SPX once again. The brief probe below that level, for a few cents and for a few minutes last Friday, was not enough to qualify as a break of that support level. It’s unclear if the bears are going to get another chance for that breakout anytime soon.
A "stealth" correction has been underway for a couple of weeks. Most people would be mildly surprised to realize that $SPX has fallen more than 60 points from its recent highs near 2110, just over two weeks ago. The decline has been steady and unspectacular, accompanied by few actual sell signals. In other words, it's been a minor correction so far.
$SPX continues to display support at 2040, but a violation of that level would be bearish.
The market's momentum is slowing, but it hasn't necessarily reversed yet. The number of negative breadth days, and their intensity is increasing. The $SPX chart (Figure 1) also shows a waning of momentum, but even the first support level at 2070 has not been broken.
$SPX closed above 2100 this week for the first time since last December. The Index chart remains bullish, with support at 2070 and 2040. There is multitudinous resistance between 2100 and the all-time highs at 2135, but this market hasn't had problems with resistance so far.
Equity-only put-call ratios remain on buy signals, even though they are mostly just moving sideways recently.
Stocks are struggling to maintain the stupendous rally that began on February 11th. While there has been a slowing of momentum, the $SPX chart remains in an uptrend for now.
The equity-only put-call ratios are both on buy signals, although there was a flirtation with a sell signal from the standard ratio (Figure 2) during this past week.
Stocks continued to rally early this week, creating some overbought conditions. Since then, the upward momentum has been lost, as the market is undergoing a short-term correction to work those off.
Equity-only put-call ratios remain on buy signals, as they generally have continued to decline.
Market breadth has begun to weaken as well. In recent days, breadth has begun to wane. As a result, the breadth oscillators are barely clinging to buy signals.
We continue to think that this rally has more room to run on the upside, but that it will eventually give way to the over-riding bear market trendline.
Near-term, there is support at 1970 and then at 1950 (the top of the "W"). It seems that the pullback to 1970 this week was about all that the bears are going to get in the short-term.
Equity-only put-call ratios continue to drop steadily, and that is bullish for stocks.
The rally has been powerful, but is it just another oversold affair? At this point, we can't really tell. The next resistance area is at 1940-1950, and that's a more crucial point. If $SPX can rise above that level, then it will have formed a "W" on its chart, and that would be quite bullish.
On the other hand, if the 1950 resistance holds, or is quickly retraced, then a much more bearish scenario unfolds.
The market broke down through support this week. $SPX retraced all the way to 1810, the January intraday lows. The $SPX chart remains negative, with a downtrend in place and heavy overhead resistance.
Conversely, the put-call ratios are becoming bullish. The computer analysis is calling these buy signals, and with the naked eye, one would have to agree.
Market breadth continues to be a problem. Both breadth oscillators remain on sell signals, but they are in oversold territory.
