After a brief dip early in the week, the S&P 500 pushed into new high territory and closed Friday up against strong channel resistance. The media reports this as tax cut buying but if so, institutiomal investors didn’t participate, as revealed by the below average Volume.
Since the last three positive days of the week probably was a smaller third wave forcing prices higher, i’m looking for a few days of consolidation near this stiff resistance area (wave iv, with a downside bias?) before a brief wave v could lead to one more attack of this resistance zone.
Overall, a wave e from the Nov. 2016 low could be in it’s last stages, which would be confirmed completed by any clear break below the lower wedge line, on a daily closing basis. Until this occurs, the short term bullish trend is viewed as intact.
OEX weekly momentum has once again reached a very overbought condition, so the next bearish crossover would increase the odds of a top in place.
The S&P 100 BPI (Bullish Percent Index) daily Sentiment chart.
The Neural Net System is Short on the OEX weekly
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With another trading month behind us, a look at long term monthly charts shows another close up against trendline resistance for i.e. the OEX monthly, with RSI-25 still flashing a bearish divergence warning sign and with Volatility – VIX monthly major support still intact.
Prices are getting closer to the Apex of the two converging trendlines, so either an upside or downside breakout could be the outcome within this coming Fall, at the latest.
TLT monthly major trendline support is still intact after the January trading month, keeping the long term bullish trend intact at this point. Any monthly close below it, could mean further weakness coming thereafter, towards the next lower trendline.
And this would also mean the 30y US T-Bond Yield is probably going for a test of the very important trendline coming down from the 80’s.
Gold closed roughly 60 points higher in January, after testing major trendline support in December 2016. It could be targeting the major upper trendline which is up around 1310, depending on when it’s reached.
Light Crude pulled back in January, so the nearly equal Dec. & Jan. highs is now a resistance challenge to overcome first, before it can climb even higher. RSI-25 still has plenty of room to the upside before getting overbought, in what could be a wave 4 underway from the 2016 low.
Real Estate – REIT Index is still trading within a bullish channel from 2013. It formed a bearish Pin bar in January, so any break of the Pin bar low would increase the odds of seeing a pull-back towards channel support.
As suspected, the US Dollar made a retreat in January and it’s close near the low for the month, indicates a coming test of trendline support, which is around the 98 level for February.
Short term, the S&P 500 daily gapped lower from channel resistance early in the week but found support on the lower Triangle line a few days later. The gap was filled by the end of the week and the S&P 500 is now near the previous week’s high.
With RSI-2 at an overbought extreme, the question is if the market is able to push prices to new highs or form a lower high, early next week.
Although now less likely because of the deep retracement, a lower high would make a wave 2 scenario from Tuesday’s low still a valid wave count and with it a sharp wave 3 to the downside can’t be ruled out.
Any break into new high territory would cancel this wave 3 possibility but it wouldn’t necessarily cancel another pull-back, in case a new test of channel resistance is seen.