The bears seemed to have the fight knocked out of them by the big rally from 1820 (on Oct 15th) to here. $SPX moved steadily higher yesterday, and closed at another new all-time high. Meanwhile, the upper 4-sigma “modified Bollinger Band” (mBB) continues to decline because of the decrease in volatility. It is now just below 2021, and with $SPX at 2038, you can see that it’s quite a ways above that Band – in overbought territory, if you will.
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The rally continues to push to new all-time highs in most of the major broad-based indices ($SPX, $OEX, Dow, etc.). The advance has been so straight and fast that it hasn't left any support levels in its wake. The only one was at 2001, so a pullback below 2000 would be negative.
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The rally has been a straight-up affair, leaving a "V" bottom in its wake. Fortunately, our indicators have generated a strong series of buy signals along the way.
Since $SPX has sliced through virtually every conceivable resistance area, it makes it difficult to identify either support and resistance at this point. However, the overbought conditions that now exist have -- in the past -- caused the market to stop rising.
The stock market has rocketed back from a sharp selloff last week. At first, this appeared to be an oversold rally, but now it is picking up steam. Thus, it appears that it could be another intermediate-term bullish move, if one final thing falls into place: the $SPX chart must clearly turn positive.
The stock market’s rally yesterday was beyond strong; it was downright Herculean. The shorts have been crushed, just a week after they seemed to be in control of things. But are the bulls on safe ground here, or is the market poised to lurch downward again? That’s a tough question to answer, but it certainly does seem that things are a bit overdone on the upside and some backing a filling is needed – at a minimum.
Stocks have had a rocky week, but some buy signals are beginning to appear. $SPX broke down through support at 1925 this week, and immediately plunged to 1820, which is also the area of the April lows. That is support for now. If that should give way, then the February lows at 1740 would be the next support area.
As for resistance, there is plenty of overhead resistance from 1925 all the way up to 1960 and beyond.
The feature article outlines several potential trading signals that are setting up in this volatile, bearish market. In fact, most of the articles discuss current market conditions, because those conditions are quite interesting at the current time.
On page 4, there is a day-trading recommendation, based on the daily Total put-call ratio