Join Larry McMillan as he discusses the current state of the stock market on July 22, 2024.
Small cap stocks joined the "party" about a week and a half ago. They were late to do so, but were able to push $SPX and many other indices sharply higher. They brought with them improved breadth figures and new all-time highs for $SPX.
Unfortunately, their inclusion seems to have created such severe overbought conditions that a correction is now underway. Sell signals are beginning to emerge, although it is not clear that the bull market is over.
The market continues to trade higher, and the pace is accelerating. Moreover, the euphoria that has been enjoyed by $SPX now seems to be spilling over into the small-caps such as the Russell 2000 Index ($RUT; IWM). The inclusion of the small-caps has expanded breadth, so that is no longer a negative divergence. In fact, Cumulative Volume Breadth (CVB) has been making new all-time highs right along with $SPX -- almost every day in July. This is no longer just a NVIDIA (NVDA) market.
The stock market, as measured by the S&P 500 Index ($SPX), continues to rise, making new all-time highs, both intraday and on a closing basis. This alone makes the $SPX chart bullish and dictates that we continue to hold a "core" bullish position.
There are several support levels beneath the market as it has worked its way up in a stair-step fashion: 5450, 5380, and 5260.
Stocks have traded in a tight range for several days. While there's some divergence between $SPX and the broader market, the trend remains upward with $SPX hitting new highs. Support levels are at 5400, 5350, 5260, and possibly 5450.
Equity-only put-call ratios are moving sideways near the lows of their charts. This is an overbought condition but not a sell signal. These ratios need to rise sharply to confirm a sell signal.
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At the current time, $SPX is making new all-time highs daily (four days in a row and five of the last seven). Hence, the $SPX chart is very bullish. There is a support zone, originally created by the trading range in mid-May, from 5260 to 5325. This week's daily lows quickly bounced from the 5330 area. A close back below 5260 would be negative, but that is certainly not imminent.
