Piling On

Correction: in our previous blog, we noted that near term momentum reversed “from up to down for 23 of the 27 S&P industry groups… .” It was actually 23 of the 24 industry groups.

Tuesday’s 1.3% decline was not as intense or as broad-based as Monday’s, but it did extend the new downtrend and added a few more negative developments. Volume remained below its 21-dma, but increased. Thus, the market has now experienced consecutive “distribution” days for the first time in over a month. As a result, 222 of the stocks in the “500” fell on increased volume, versus the 39 that rose on higher turnover. And, now, all 24 industry groups are under near term momentum pressure – with 22 of those still on the overbought side of neutral. Finally, the index closed well below the dominant March-June uptrend line.

All of this increases the likelihood that the 22-week cycle has reversed to the downside. If so, the resulting pressures should persist into at least early August.

S&P 500 with Ideal 22-Weak Cycle

Support is the 866-879 range; a breach of that range will be of tactical importance in that it will be a virtual confirmation that the index was engaged in an intermediate (3-5 month) correction. Resistance is at 956.