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.
Stocks continue to have trouble rallying, but at least support has shown up in the 1870 area of $SPX. If that level is broken on a closing basis, it would mark the end of any short-term rally attempts.
Even though both equity-only put-call ratios are on sell signals and pressing against new highs, they are in deeply oversold territory.
Market breadth has improved this week. As a result, both breadth oscillators are now on buy signals.
The stock market has taken a real beating in the new year. Massive oversold conditions have arisen, and a sharp, but short-lived rally is possible at any time. The larger picture, though, is an intermediate-term bearish one.
$SPX has been down-trending since early December, when the first pattern of lower highs was established. The current pattern of lower highs and lower lows remains intact, and that is bearish.
The stock market had been muddling its way through the Santa Claus rally period, and this now looks like it will put the final, negative touches on this seasonally important period.
At this time, the chart of $SPX is bearish, with lower highs and lower lows (see Figure 1). There is support near 2000, where $SPX appears to be headed for a retest very early in the new year.
The stock market, as measured by the S&P 500 Index ($SPX), did a complete about-face this week, despite the terrorist atrocities after the market closed last Friday.
The rally has carried back to just above the 20-day moving average. Ultimately, there is resistance from 2115 to 2135, the series of market tops that have been made in the last year.
The stock market's strong rally has continued for another week, although it's beginning to act a bit tired, and the market is getting overbought. Even so, the $SPX chart is still in an uptrend, and there is support at 2040, 2020 and 2000.
Equity-only put-call ratios continue to plunge, and that is bullish for stocks. These ratios are now in the lower portion of their charts, which is just on the verge of being overbought.
The stock market, as measured by the Standard & Poors 500 Index ($SPX), has gained 220 points in a month (since the September 28th lows). After such a strong advance in so short of a time, one would have to say that the market is overbought. Even so, actual sell signals have been hard to come by.
The $SPX chart itself remains bullish in that it is in a pattern of higher highs and higher lows, and the 20-day moving average is rising.
Earlier this week, it appeared that the rally that began at the end of October was lagging. But then Thursday, the market blew through resistance at 2040 and reaffirmed the bullish case with authority. A violation of the 1990 would remove the "bullish" label from the $SPX chart.
Equity-only put-call ratios remain on buy signals, as they continue to decline (Figures 2 and 3).
