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.

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