S&P Bulls Defy Expectations; New Historical High
Updated
Last week, the bulls did something remarkable. At the start of the week, there was a clear bearish reversal pattern forming on the daily chart. Despite being a believer in the bulls (given the strength of the weekly chart), I was still quite certain that sellers would at least be able to take down the weak low from the last week of June (SPX 5,448). However, instead of breaking through, the sellers made only a weak attempt on Monday. After a brief pause, the market rallied, breaking through all previous highs.
It is hard to grasp such a change in sentiment, especially since there was nothing particularly surprising in the economic data or the FOMC announcements. Sometimes, it seems that the market itself is confused, and the best we can do is observe its behavior day by day and make quick adjustments to our strategy. There was absolutely no clear reason behind the sell-off on Friday the 28th (presidential debates? really???), but we had to trust price action and let it shape our strategy. Only now can we conclude that it was a “fake” weakness (actually, we already started suspecting it on Tuesday). More likely, it was temporary confusion in the market, caused by many contradicting political and economic signals.
The current outlook is bullish. The market has set a new high, and the majority of sectors ended the week strong (see Market Inner Strength Index). The only possible warning is that the weekly RSI is approaching the overbought condition. The last time this happened (at the end of March), it triggered a weekly consolidation, but again, nothing is certain.
P.S. this week is heavily packed with economic data releases. Also, banks report on Friday. Things might change really fast
Disclaimer
I don't give trading or investing advice, just sharing my thoughts.
It is hard to grasp such a change in sentiment, especially since there was nothing particularly surprising in the economic data or the FOMC announcements. Sometimes, it seems that the market itself is confused, and the best we can do is observe its behavior day by day and make quick adjustments to our strategy. There was absolutely no clear reason behind the sell-off on Friday the 28th (presidential debates? really???), but we had to trust price action and let it shape our strategy. Only now can we conclude that it was a “fake” weakness (actually, we already started suspecting it on Tuesday). More likely, it was temporary confusion in the market, caused by many contradicting political and economic signals.
The current outlook is bullish. The market has set a new high, and the majority of sectors ended the week strong (see Market Inner Strength Index). The only possible warning is that the weekly RSI is approaching the overbought condition. The last time this happened (at the end of March), it triggered a weekly consolidation, but again, nothing is certain.
P.S. this week is heavily packed with economic data releases. Also, banks report on Friday. Things might change really fast
Disclaimer
I don't give trading or investing advice, just sharing my thoughts.
Note
No activity today.Note
Weekly RSI is hitting overbought condition while CPI data is to be published in today. Good chance for Sellers finally to show something.Note
Some selling today but not quite convincing. 1. There is no excess at the top 2. Sellers were able to take down previous day low but without much follow through. 3. If we look at individual sectors performance some sectors (Tech) were declining while others (Financials, Healthcare) were growing.Finally, inflation data was quite positive so there is no reason for fundamental shift.
Note
Crazy volatility in the last two days. But all ended good for bulls
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