On Monday, September 11th (a date we will never forget), $SPX broke out to new all-time highs. There hasn't been a lot of follow-through after that, but those highs have been retained.
The importance of these new highs is that they distinctly turn the charts positive. The $SPX chart now has support at 2480 (the old highs), as well as at 2460 and every 20 points down, all the way to 2400.
$SPX has staged a rally that began on Tuesday's opening (August 29th) and has lasted three full days to date. The result was a breakout through the downtrend line that had been in place (see Figure 1), and that has turned the $SPX chart bullish.
On the downside, the first support level is 2440. Tuesday's rally has also left 2428 as a support area, to go along with 2420, and then the major support area at 2400. A close below 2440 be a enough to negate the current upside breakout, in my opinion.
Despite the media euphoria over recent rally days, the $SPX chart remains short-term negative because of the downtrend lines (see Figure 1). So far, this is showing no signs of being more than a short-term correction, though. It would take a breakdown through major support at 2400 in order to turn the $SPX chart truly bearish.
$SPX has broken to new lows for this move, taking out the support at 2437. That means that a test of the 2400 level is likely in the cards. There is resistance at 2480.
Even with the relative negativity of recent movements, it is worth remembering that as long as support at 2400 holds, the $SPX chart will remain positive.
Certainly the $SPX chart is still bullish at this time, but once again $SPX is trapped in one of those tight ranges -- this time between 2460 and 2480. That range has essentially contained the action for the last twelve trading days. In the last nine months, since the election, those tight ranges have generally been resolved by an upside breakout. But until we have verification of that, it is wise to be prepared for a correction.
The $SPX chart is unabashedly bullish. It continues to make new highs, remaining above the trailing moving averages and holding above support. Thus the intermediate-term outlook is still bullish, per the $SPX chart (our most important indicator).
Equity-only put-call ratios remain bullish (Figures 2 and 3). The standard ratio has developed a little "wiggle" over the past few days, but at this point the computer analysis programs are still grading this chart as being on a buy signal.
Bulls have been totally dominant again, over the past week (and really since last November). The gap upside breakout over the minor downtrend line (blue line in Figure 1), on July 12th, was once again the beginning of a strong upward move. This was similar to the previous upside breakout gap over a downtrend line, in late April. The $SPX chart is thus strongly bullish and will remain that way until support at 2400 is broken.
First and foremost, the most bullish of our indicators is the $SPX chart itself (although some of our other indicators seem to be grudgingly improving as well). The 2400 area has been rock-solid support and until that is broken the $SPX chart will remain bullish.
Equity-only put-call ratios are technically on sell signals, according to the computer analysis programs. However, the weighted ratio (Figure 3) has curled over, so its sell signal is weakening.
This stock market has been able to avoid a meaningful correction for quite some time. But now $SPX has closed below support at 2420, and the failed upside breakout of mid-June is looking like a big negative item on its chart, as well. Of course, several times in the recent past, it seemed as if $SPX were about to succumb and it didn't. Can $SPX pull this escape act off once again? If it can hold support at 2400, it will.
A real battle has developed around the 2420-2440 area of $SPX. That has been the trading range for the entire month of June, but recently there have been some violent moves within the range, including some failed attempts to break out of it. As a result, this is setting up a more important breakout, once $SPX can find its way to clearly break out of the range.
