For some time, we have been waiting to see if $SPX can break out on the upside. A breakout has not occurred, despite marginal new all-time closing highs (by pennies) for $SPX.
In reality, $SPX remains trapped within not one, but two trading ranges. The first range is the larger one -- comprised essentially of the March highs and lows, 2322 to 2401. Within that range, there is an even tighter range at play: 2380 to 2400. Because of these trading ranges, the $SPX chart is neutral.
As you certainly recall, after "Frexit," $SPX broke out strongly to the upside gapping up on two consecutive days (something that is quite unusual for a large-cap index). However, since then it has virtually gone nowhere. As $SPX has hunkered down in this tight band, some technical deterioration has appeared.
The stock market had a very favorable reaction to the French election. From a technical analysis standpoint, the move also brought in buyers, since $SPX broke upwards out of the pennant that had formed on its chart (red lines in Figure 1). But $SPX has not made new all-time highs, despite many of the small-cap indicies doing so. A cynic might say that $SPX is still in a trading range between 2322 and 2401 until proven otherwise.
Stocks (as measured by the $SPX Index) have had plenty of chances to collapse or to rally to new highs. Instead they have done neither, frustrating both bulls and bears.
In looking at the $SPX chart, two things stand out to me: 1) there is still a downtrend in place, from the all-time highs on March 1st, and 2) the support level at 2322 remains untested and thus is important.
Some deeply mixed signals have arisen in the last week. The basic chart of $SPX remains in its frustrating trading range, while breadth and put-call ratios generate mixed signals. However, $VIX has broken out to the upside, and that has generated some usually reliable sell signals.SPX continues to remain within the bounds of the March price range -- support at 2322 on the downside and ultimate resistance at 2400 (the all-time highs) on the upside.
Stocks (as measured by the $SPX Index) have had plenty of chances to collapse or to rally to new highs. Instead they have done neither, frustrating both bulls and bears.
Stocks (as measured by $SPX) made their highs on the first of March and have been struggling to regain that level ever since. Last week's breakdown beneath what appeared to be important support at 2350 generated enough selling that, this past Monday, $SPX opened down nearly 20 points and seemed primed to head lower. But buyers stepped in at 2322, and it's been nothing but up, up and away ever since. So that level represents important support now.
The stock market has finally broken a support level, in terms of the Standard & Poors 500 Index ($SPX). When $SPX traded below 2350 on Tuesday, it led to a fairly severe down day. This turns the short-term picture negative. The next support level is at 2300.
Equity-only put-call ratios are quite bearish. They will remain bearish as long as they continue to trend higher.
The stock market, as measured by the Standard & Poors 500 Index ($SPX) rather quietly bottomed a week ago and has moved steadily higher over the ensuing week. Thus, the $SPX chart remains bullish with support at 2350 level.
Things are beginning to deteriorate, somewhat in terms of price, but mostly in terms of our indicators. We've seen this scenario before, though -- most recently in late December, but the market response was subdued and volatility remained low. That combination resulted in a move to higher prices after December, and it could well be that the same is setting up now.
