Bouncing Back

The major indices have spent most of August in some form of light consolidation. For the S&P 500, after putting in another all time high on the 8th, the market took a relative dive down into the 2420s. Since then, the market has been bouncing back, particularly within the past few days, and looks set to move higher within the range it has traded in since early March.

S&P 500, 30 minute bars


There are plenty of support and resistance levels evident on both the 30 minute and daily charts of the S&P. What is evident is how tight the market’s range has become. While maintaining a distinctly upward bias, the swings have consistently stayed within a 2% range.

S&P 500, daily bars

With the end of summer fast approaching, we are staring a the last chance for the bears to make any kind of a significant showing prior to the beginning of the seasonal strong period. Keeping an eye on the rising levels and moving averages for breakpoints that may signal the onset of a significant correction will be of heightened importance over the next four to six weeks.

Considering Divergences

Over the course of July, the S&P 500 continued making incremental progress higher, with multiple new all time highs, despite a weak June, and a weak start to the month. However, while the stock market has been hot, the US dollar has been decidedly not so hot. The greenback has fallen about 8% over the course of 2017, and has logged five consecutive monthly closes as of today.

The weak dollar in the near term has provided a tailwind to corporate earnings and stocks by extension to a certain degree. The macro picture may not be as rosy looking further out, though. The weak dollar gives broader latitude to the Fed to raise rates and trim its balance sheet, and with a heavily oversold dollar, a bounce may be due in short order, which on its own could have significant market implications.

S&P 500, 30 minute chart

For the time being, though, the market trend appears higher, albeit at a ¬†downshifted pace. A new overhead level of resistance is emerging, signaling a downward inflection of the rising range in which the market has traded for most of 2017. The light blue channel at the top of the 30 minute chart represents a “sell level” indicator if the broader light blue channel is to hold for the duration of the summer. Should we break out of this level, we could see the market rally substantially higher in a hurry, but this is a less likely scenario in my estimation.

S&P 500, daily bars

Should the S&P 500-US dollar divergence begin to close, the market has plenty of room to move to the downside without suffering a critical rising trend breakdown. The market has substantial support levels at 2426 and 2390, both of which if revisited would present great long side entry opportunities for a resumption of the longer term bull market. Below those levels, there is a lot of air until the 2290 and 2150 levels are reached, should a significant correction be in our near future, though a revisit of these levels are pretty unlikely for some time.

While caution is warranted with the market trading at more than fully valued levels, the most likely scenario for the rest of the summer is a slow gradual rally with small speed bumps. As always, keep your eyes peeled and good luck out there.


June has largely been a month of consolidation for the S&P 500. Despite the fact that the index hit multiple new highs this month, we’re finishing the month nearly right back where we started. Having entered the summer with strength, the market is flashing signs now that consolidation might be in order in the near future.

S&P 500, 30 minute bars

For those inclined to buy, the most reliable recent “buy zone” has been in the range illustrated by the bottom two parallel black lines on the 30 minute chart above. The market has found itself moving gradually higher within the range between the two sets of rising black lines since December, and looks set to continue doing so, testing the ranges at intervals as it goes.

S&P 500, daily bars

That tendency is even more apparent on the daily chart. The strength of the rally is fully intact, though mature. Should the S&P begin to consolidate, there is much room to the downside below the 2400 level. Downside support levels below that currently fall at the 200 day moving average at 2300, and the lower end of the broader intermediate term rising range at 2275. Below that, there is further strong support at 2150.

While the market shows all signs of continuing to rally in much the same fashion as it has year to date, its good to keep in mind that seasonal factors often work against it during the summer, and keeping critical support level in mind is always a good idea. Good luck out there.

Arching Over

As spring wears on, the market tends to slow, and this process is evident in 2017. While the major indices have all been making new all-time highs recently, the pace of appreciation has diminished from that of the November-March period.

The S&P 500 has settled into a tighter upward sloping range of late (black channel), while also interacting with the lower end of the aforementioned November-March trend (green channel). The index looks set to follow this recent path for the foreseeable future, with support in the 1370 region, clearly visible on the 30 minute and hourly charts.

While we can safely expect some periods of turbulence and consolidation during the summer doldrums, the market’s longer term up-trend shows all signs of remaining intact, despite numerous potential geopolitical and economic risks. However, if looking for entry points for new capital, there is ample reason to wait and take advantage of entry points on the lower end of the recent rising range when they present themselves.

S&P 500, hourly bars

S&P 500, 30 minute bars

S&P 500, daily bars

March Madness

As if on cue, the S&P 500 peaked on March 1st, and spent the entire month stair-stepping downwards gradually, as is most clearly evident on the 30 minute chart below. The mild pullback was certainly overdue, as the torrid rally in February had doubtless gotten ahead of itself.

S&P 500, 30 minute bars

There is no question that political consideration have played a large part along side the economic ones. The pullback coincided with increasing political tribulations for the Trump administration, and growing doubt regarding the likelihood of key pieces of the Trump agenda coming to fruition. So it makes sense that some of the rosy optimism the indices had already priced in would be duly re-priced.

Looked at from the perspective of the daily chart, however, its clear that the March pullback is just that, a relatively small pullback within the context of a much larger and more well established bull market that is still in full swing. The S&P 500 has multiple levels of support below current levels, including 2340 and 2300. However, should the pullback accelerate, the next most viable support falls just above 2200, a significant gap down.

S&P 500, daily bars

However, should we revisit the 2200 level, there would be plenty of technical justification for going long. Strong very long term trend support at these levels make it a high conviction entry point to buy.

While there is a possibility we may simply move higher from these levels, but there is no shortage of risk above 2340; the market is more than fully priced, especially considering slowing corporate top line growth and growing geopolitical tensions. Caution and tight stops are warranted here for long positions, still favored before the beginning of the seasonally weak period beginning May-June.

Best of luck out there.

Higher And Higher

2017 has so far been the year of the Bull. Markets have been going up steadily with the Dow logging 12 straight record closes, and the major indices generally matching that performance. All major trends are and remain up.

That said, the markets are in danger of overheating, and a pullback, while not necessarily imminent, is overdue. The S&P 500 now finds itself snugly at the top of near term and medium term rising ranges, clearly evident on the 30 minute chart below.

S&P 500, 30 minute bars

The light green channel highlights the extent of the rally since the Brexit lows of June 2016, and this channel has dominated the near term market outlook especially since the US election in November. In all probability, the green¬†channel will continue to act as a rough guide to the market’s trajectory for the duration of the bullish season, which typically ends in May/June.

S&P 500, daily bars

The daily chart provides additional clarity on the strength of the S&P 500 recently. Note though how overbought the index is in the near term. At these levels, the likelihood of a pullback grows dramatically. Its tough to buy here; more favorable opportunities should present themselves presently. A move back down to the 2310 level or below would represent an excellent potential point of entry.

S&P 500, weekly bars

That said, for those with a longer term outlook, the undeniable strength of this market presents opportunities even at these levels. Longer term, the market appears set to move substantially higher, barring the risk of exogenous shocks and major adverse events. The weekly chart above and monthly chart below put the recent rally, and the bull market since March 2009, into more context. As is evident on these long term charts, we remain in the middle of the secular rising range dating back to the 1950s.

S&P 500, monthly bars

While the long term picture is bullish, remember that we have near term overbought conditions predominating in all the major indices. While the outlook remains bullish, we remain optimistic that better entry points should present themselves in the relatively near term.

Good luck out there.


Running Hot

Since the election, the US markets have seen considerable appreciation. The S&P 500 in particular has been running hot, advancing more than 200 points between early November and January 26. The rally has attenuated somewhat since the December 13 peak, decelerating notably from the rapid pace of advance immediately after the US election. The post-inauguration bump, while bring the markets to new all time highs, has brought little follow through.

S&P 500, 30 minute bars

On the 30 minute chart, we can see deceleration clearly, as the channel originating Dec 13 shows. Last weeks trade saw a definitive breakdown out of the post-election uptrend channel, confirming the slowdown. The price action to date is indicative of a broad arching top.

S&P 500, daily bars

On the daily chart, we can put the recent price action into more context. While the S&P remains withing the broader upward channel defined by the orange lines, it is sluggishly lingering toward the top of that range. While there are numerous support zones below between the market and the lower orange channel boundary, there is plenty of room for the market to correct before heading higher. While a bullish medium term outlook is favored, the likelihood of mild pullback in the next few weeks to a month has increased over the last week.