Looking for the Pause that Refreshes

On Monday, the S&P 500 gained 1.5%. Upside volume recorded a 9:1 day versus downside volume, but breadth statistics failed to record a similar margin. Thus, the day as a whole was not a 9:1 event. Nonetheless, there have only been three times in the 18 days since the July low where the S&P has recorded a lower low than the day before.

As mentioned in yesterday’s post, it doesn’t get any better than this. And that may be a reason to anticipate a pullback. In that vein the daily Coppock appears to have peaked and we are inclined to count the rally from last Wednesday’s low as the fifth wave up from the July 8 bottom. Historically, a falling Coppock tends to be under pressure for 2-3 weeks. Thus, the first half of August could be rather disappointing, especially when compared to July’s robust performance. However, such a pullback may prove to be only a pause in a still incomplete bear market rally pattern.

S&P Groups with Bearish Daily Coppock Curve

We will give this current “last gasp” from last week’s reaction low the benefit of the doubt as long as the index holds above 968.65. As such, the door remains open for a challenge of chart and Fibonacci resistance in the 1007-1048 range.

A violation of 958.65 would be an indication that the entire rally pattern from at least the July 8 low was complete.