Resiliency

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On Tuesday the S&P 500 rallied 1.0%. While this was a bounce compared to Monday’s 2.4% sell-off, the market’s internal strength recovered a good chunk of the prior day’s losses. For example, 23 of the 24 S&P groups fell on Monday, but 22 rallied on Tuesday. Total volume declined on Tuesday, but up volume was 85% of the total, whereas down volume was 91% of the total on Monday. And the bullish percentage for the S&P actually gained ground on Tuesday.

S&P Hourly with Post-July Fibonacci Retracement Levels
One day does not make a trend, and we are not saying that Monday is proving to be a non-event. But Tuesday’s internals are signs of resiliency and are in line with our observation in our last post that the combination of pattern, breadth, momentum, and volume going into the recent high suggest that even higher highs are still to come.

That said, the new downtrend from last week’s high does not appear complete. Hourly momentum confirmed Monday’s low and the daily Coppock has a bearish bias for all 24 industry groups. All told, these pressures appear positioned to remain in force into the end of the month. Moreover – and as mentioned in recent comments – we typically expect at least a 38.2% retracement of a prior trend; this would imply a test of the 961 area. On balance, therefore, we are inclined to look for lower lows before the post-July uptrend regains its footing.

A break of the aforementioned 961 support area would imply further weakness toward Fibonacci (50%-61.8%) and chart support in the 944-926 range. The July low itself at 869 is still viewed as tactical support.

Chart and Fibonacci resistance in the 1007-1048 range had become increasingly stubborn and has repelled the rally from July’s low. By definition, it is now benchmark resistance.