When asked how the market did on Monday, some may say that the DJIA was up 44 points. They might even tell you that the S&P 500 gained 0.3%. Others might say that is was mixed since the NASDAQ lost over 0.5%. Our answer would be that Monday was n-a-s-t-y.
We say that because, even though the DJIA and S&P closed higher, both had a lower high and a lower low than Thursday. In the process, both indexes reached new lows following their respective June high. In addition, NYSE breadth was moderately negative. And while volume remained low, it was higher than Thursday and our measure of accumulation is very near a new low for the 45 month history of our model. If that weren’t enough, our calculation of the point and figure sector sum indicator for the S&P 500 moved into negative territory for the first time since March.
S&P 500 with Sector Sum Indicator
All that said, near term momentum still has a bullish bias and still has the potential to maintain that condition until our projected mid-month time frame. So while we continue to remind readers that medium term momentum is weak (and likely to remain that way for 3-5 months) even as the 22-week cycle has likely turned down, we are willing to allow for a “pop” back toward the June highs. Clearly, such a rally would merely serve to create important divergences and is suitable for only more aggressive traders. For others, let’s be careful out there.
The 935-936 area is first resistance; second resistance is indicated at June's 956 rally high. We continue to view 879-866 as tactical support; a decisive breach of that range would open the door for further weakness toward at least 812-777.
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