Lately, there has been commentary about how the Standard & Poors 500 Index ($SPX) has not made a 1% move (using closing prices) since July 8th. That’s 36 trading days and counting, through Monday, August 29th. Is that a long time? It certainly seems like it is. It's the longest period of time without a 1% move in over two years. However, we don’t like to go by “feel,” but rather by statistics, and the statistics show something a bit different.
This week, $SPX did break down a little bit, violating the 2175 level, which had been the bottom of the tight 2175-2195 trading range that had contained prices for most of this month. But the piercing of minor support at 2175 was not significant. However, a breach of the 2160 support area would be more damaging, in my opinion.
Stocks continue to trade in a tight, sideways range. This is a situation which will eventually lead to a breakout. Most analysts are bearish because of the low volatility and because of the fact that $SPX is near or at all-time highs. But the important part of that sentence is "Most analysts are bearish." Forget the reasons. If they are mostly bearish, the market is unlikely to accommodate them.
New all-time intraday and closing highs were registered yesterday for $SPX, the NASDAQ Composite, and the Dow- Jones Industrials. Thus the $SPX chart remains bullish as it is clearly in an uptrend, and the moving averages are all rising as well.
The market tried to break down this week, as $SPX finally pushed through the lower end of the very tight 2160-2175 trading range that had held it in check since mid-July. However, that feint downward was short-lived, and $SPX crawled right back up into the trading range once again. As a result, the $SPX chart remains bullish.
The major support area is 2120-2135, the top of the trading range that had held $SPX back from making new highs for over a year.
Without a doubt, the hardest thing to do in the stock market is to spot a major market top before it happens. Bottoms are much easier to discern. One reason for this is that bottoms tend to be “V” or “W” affairs, with sharp downward spikes and sharp recoveries, but tops are “rolling” things that can take what seems like forever to complete.
The broad stock market, as measured by $SPX, is locked in a very tight range -- and has been since new all-time highs were reached on July 14th. Overall, though, $SPX remains in a strong uptrend, with support at 2160.
Equity-only put-call ratios remain on buy signals, as they continue to move lower on their charts. They are now reaching the lows of 2015.
Early this year, we noted that some longer-term indicators had given bullish signals. One was when $SPX advanced by more than 1% for three consecutive days. That occurred in early March. Another bullish sign was when $SPX remained above its 20-day moving average for at least 30 days. That occurred during March as well. In both of those cases, the short-term gains were “meh,” but the longer-term ramifications (one year out, say) were quite positive.
Stocks continue to plow ahead to new all-time highs on the Standard & Poors 500 Index ($SPX). This has created some overbought conditions, but as of this time, there are no sell signals in place.
$SPX has support at the old breakout level of 2120-2135, so any correction should hold at that level. On the upside, we have targets of 2198 and 2226.
