Stocks are still in a negative mode, despite the presence of some very strong rally days emanating from oversold conditions.
The 2940-2950 area represents resistance for several reasons. Meanwhile, there is support at 2825, where $SPX has bottomed on three separate days recently. Below there, the support at 2720-2730 is more identifiable, for that's where $SPX bottomed out in both March and May.
Equity-only put-call ratios continue to rise, thus remaining on sell signals.
The market took a nasty turn downward at the beginning of the week, violating support levels. But that created oversold conditions, and a strong overold rally has followed.
Chart-wise, there is resistance at 2950 and 2980. There is a new support level, at about 2825 (this week's lows), and then below that at 2720-2730, the March and May lows.
In our market commentary for the past few weeks, we have occasionally mentioned the fact that realized volatility (the 20-day historical volatility, say) of $SPX was very low and that a sharp increase in that volatility measure would not be good for stocks. This is somewhat akin to how we view implied volatility ($VIX) in that we are not too concerned when it is low, but do become cautious when it starts to rise. The difference in the two is that realized volatility is backward-looking, while implied volatility is forward-looking. On the surface, one might think that forward-lookingwould be better, except that we don’t know who’s doing the looking. Sometimes, $VIX seems to get distorted, so perhaps there are times when realized volatility could be a better measure.
Everyone was worried about the FOMC announcement this week, but it turned out to be benign. But, on Thursday President Trump tweeted that there would be more Chinese tariffs. Whether the market over-reacted to this tweet or whether there were just a lot of traders looking to lighten up, a torrent of selling was unleashed.
Stocks made new all-time highs again this week, overcoming some negativity from a few areas. That negativity remains, but the $SPX chart itself is strong, and so are the NASDAQ Composite and the NASDAQ-100 ($NDX; QQQ).
Early in the week, $SPX pulled back for a couple of days, making daily lows just above 2970. That is the first support area. Just below that is another support area, at 2950-2960.
After an impressive month-and-a-half rally from the beginning of June to mid-July, it looks like a correction might finally be at hand. There is support at 2950-2960 and 2890-2910.
The equity-only put-call ratios are still on buy signals, according to the computer analysis programs that we use to track these charts.
Market breadth has weakened a bit, and both breadth oscillators have rolled over to sell signals as of the close of trading on July 17th.
New all-time highs were registered this week by the S&P 500 ($SPX), Dow ($DJX), NASDAQ Composite, and NASDAQ-100 ($NDX; QQQ). However, it is not necessarily a good thing when the large caps are leading the rally, but that's what's happening now.
The S&P 500 Index ($SPX) has made new all-time closing highs on the last three days. Other indices are following most notably the Dow ($DJX) and NASDAQ (QQQ and Composite).
There is support on the $SPX chart at the old highs (2940- 2950) and below that, where there was more work done, at 2890- 2910.
The equity-only put-call ratios remain strong and on buy signals, as those ratios continue to drop rapidly.
$SPX pulled back this week, partly because the market was overbought and also because the week after June expiration is a seasonally weak week. So far, it's just a normal pullback, with support at 2890-2900.
Equity-only put-call ratios remain strongly on buy signals. Their downward trajectory was not even fazed this week, as they held steady to their buy signals even while $SPX corrected a bit.
The prospect of lower rates in both Europe and the U.S. has driven the market into a bullish stampede, as it seems to be on a massive "high."
There should now be support on the $SPX chart at 2890-2900, the area which was most recently overcome as resistance. Below there, it's a sharp drop down to the major support at 2720-2730 (the March and June lows). There is no formal resistance, since we are trading at new all-time highs.
