Stocks made new all-time highs again this past week, but early in the week. Even then, breadth wasn't good. Now $SPX has pulled back slightly from those intraday all-time highs of Tuesday. Yes, there are overbought conditions, but more importantly there is the looming September 30th deadline for a possible government shutdown. The market seems to have been much more nervous about that in the last few days, especially since President Trump said that the government might shut down for a few days.
The Fed lowered rates by a quarter of a percent on Wednesday, and the market liked it. Many people had been expecting a "sell on the news" after that, but instead $SPX has plowed ahead to new all-time highs in a strong fashion. The $SPX chart remains very bullish. There is support at 6500 (the August highs), 6340-6360 (the August lows) and 6200 (the July lows). Those are all marked with horizontal red lines on the $SPX chart in Figure 1.
The market continues to plow through worries galore and continues to register new all-time highs. This is true for $SPX, $NDX (the NASDAQ-100; QQQ), and the Dow ($DJX; DIA), but not the Russell 2000 ($RUT; IWM). Yesterday's CPI report was benign, and so it seems that the path is clear for a rate cut at next week's FOMC meeting. $SPX responded accordingly by having one of its strongest days in weeks.
A week ago, $SPX had made new all-time highs and was flying high on the back of the Fed seemingly turning more dovish (i.e., willing to lower interest rates). But then September began, and the media was full of articles about how it's the worst month (which is true) and traders should beware. So the first trading day of September (last Tuesday) resulted in a sharp intraday loss. However, $SPX rebounded later that day, and since then $SPX has ploddingly moved higher and is now at new all-time highs once again.
The positive tone set by Fed Chair Powell's speech a week ago (August 22nd) at the Jackson Hole Economic Symposium has continued throughout the week in various bullish ways. Initially, the strongest move belonged to the Dow ($DJX), which blasted to a substantial new all-time that day. It hasn't added to these gains yet.
At that same time, $SPX rallied to its old highs but couldn't break through until August 28th, and now it too stands at a new all-time closing and intraday high.
The $SPX Index has backed off slightly from its all-time highs at 6480, set last Friday. This is a modest correction, and the support levels at 6260, 6200, and 6150 are still in place. Any pullback to those levels followed by a resumption of the market rally would just be considered a correction in an ongoing bull market. However, a breakdown below 6150 would be quite negative.
Stocks pushed to new all-time closing and intraday highs this past week on two separate days -- August 12th and 13th. Any chart making new all-time highs is, by definition, bullish. There is support at 6400, 6200, and 6150.
The chart of $SPX remains bullish. The Index pulled back to almost exactly 6200 last Friday, August 1st, and has bounced from there. It also bounced off that level back in early July, so that is now a valid support area. Furthermore, there is support at 6150 -- the old all-time highs as of February. As long as $SPX remains above this 6150-6200 area, its chart is positive and one should maintain a bullish attitude about the stock market. A failure at the 6150 level would likely bring in some heavy selling.
The buildup of overbought conditions has manifested itself in new confirmed sell signals. However, the $SPX chart is still positive, and will remain so, certainly as long as it's above 6150. A bullish case can theoretically be made for $SPX all the way down to 5920, but at this point, if it were to fall back below the February highs (6150), that would be psychologically damaging for it would mean that the whole breakout in June and July was a false one.
The rally that began in early April continues to drive higher into new all-time territory. There hasn't been much of a correction, and so far the internals have held up very well. However, overbought conditions are building, so we need to avoid complacency and pay attention to the indicators.
The $SPX chart is bullish, with support at 6200 (last week's low), 6150 (the previous highs), 6020-6060 (the gap on the chart), and 5920. These are all marked on the $SPX chart in Figure 1.
