After having shrugged off some internal weakness, the major stock-market indexes are poised to break upward again.
The Dow Jones Industrial Average
DJIA,
has already done so, but now the S&P 500
SPX,
is beginning to catch up, and Nasdaq
COMP,
has improved (although it is still well below its all-time highs). The S&P made a new intraday all-time high on Wednesday, but some late sell programs – probably based on end-of-the-quarter machinations – kept it from closing at a new all-time high.
The SPX chart is still trending higher; that has not changed. There is support at 3850-3870, and resistance at the all-time highs in the 3985-3995 area. A breakout in either direction from those levels would be significant.
In the past two weeks, the bears had a chance to take control, as there was some deterioration in the internals of the market. However, the bears stumbled again, as they have done so many times since March 2020, and the internals have improved. Thus, the bulls now have their chance at a breakout – this time to the upside, of course.
Technically, there is also support in the 3700-3725 area and at 3630. But those are not meaningful unless SPX does break down below 3870.
The S&P index has essentially been trading sideways since mid-March, and that has reduced realized volatility. Thus, the “modified Bollinger Bands” are beginning to converge inward on the 20-day moving average. But there is no imminent sign of SPX exceeding either of the +/-4σ Bands.
Equity-only put-call ratios are seeing a new development as well: the weighted ratio is now on a buy signal, according to the computer programs that we use to analyze these charts. As you can see from accompanying graph, it has fallen back slightly from its peak of four days ago. That is enough for the computer to rate it as a “buy.” I have placed a question mark next to the “B” on the chart, though, because it doesn’t look like it would take much for the weighted ratio to move above the late-March high, and that would cancel out the sell signal.
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