For several months we have tuned out bearishness and given a lot of airplay to the prospect of the S&P 500 rising to test its January top and potentially fill the gap up there around 2850. We have also given airplay to the prospect of this happening against a rising risk scenario and a lean toward an ultimate failure for a healthy market correction at least.
While we have made note that anything is possible in a market that is still in its major bull trends, I have held off on introducing a formal ‘what if?’ bullish scenario until SPX could clear key resistance, which it has now done.
Here is the chart used in a public post on July 18 (All Aboard the Re-Test Express), untouched from its original state other than the index’s price having flagged to test the newly formed support and over the last couple of days, rise anew.
So what we can state is that the daily chart of the SPX is bullish. Period. It’s moving average trends are up, its AROON trend is up and MACD and RSI are healthy, but not overbought. What’s more, the stock market is in a firm uptrend on longer-term time frames.
Now, taking the bull thing further, the admittedly sloppy pattern that was activated on the resistance break and support hold could be interpreted to measure up to the 3000 area.
So I want to be clear; I am not now and have not been predicting a market correction with a test of the highs. We are simply watching to see what the risk backdrop will look like at such time. The VIX remains depressed and I assume other indicators are still marching toward over bullish, but they have not been near extremes.
Many people like to make predictions because oh well, ya can’t win ’em all and ya just may make yourself famous on one of them. But I don’t play that way because people tend to believe other people who manage markets for a living. Frankly, I think predictions are foolish because half of them are wrong at any given time.
We will continue on as is, with the prospect of an S&P 500 top test and gap fill and fine tune the risk environment along the way. But we will also note the bullish aspects in play in this update. There are negative divergences out there (hello Semi sector), but as we’ve noted in the Market Internals segments of recent reports, there are plenty of positive ones too.