Are bulls winning by default?

By Lawrence G. McMillan

The bears have had many chances this month to do some serious damage to the market but they haven’t been able to. Perhaps they are waiting for the “sell in May and go away” crowd to join them next month, but perhaps they just don’t have the firepower to drive the market down. Whatever it is, the indicators and the bulls are on the brink of pushing this market higher again.

The Standard & Poor’s 500 Index ($SPX) closed at 1,390 today. That is right at the resistance area that we have been talking about for weeks. It is also where the (declining) 20-day moving average is trading currently. Resistance areas are not necessarily precise things, so there could be a modest overshoot above 1,390 and then a failure. But if SPX reaches roughly the 1,400 area, there would be no arguing the fact that would be a bullish breakout.

This week, SPX established a new support area. There was heavy selling on Monday, and SPX bottomed at 1,358 — exactly the same level where it bottomed back on April 9. Thus, that is another established support level. Of course, the more significant support at 1,340 is still intact as well...

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