We will be hosting a webinar/conference call later this month. It would be about an hour and will include both charts and Q&A. The cost will be $30 and there are still some spots available. Please send expressions of serious interest (with no commitment) to walter@wminsights.com.
On Wednesday, the S&P 500 fell 0.2%. Breadth was negative by a 4:3 ratio and down volume outpaced up volume by a 5:4 margin. However, total volume fell by 17% and dropped below its 21-day ma. The daily Coppock Curve has a bullish bias for 20 of the 24 S&P industry groups.
S&P 500 Hourly
Mixed signals abound. On the one hand, near term momentum has a bullish bias as evidenced by the daily Coppock Curve and the 10-day CBOE put/call ratio is oversold. On the other hand, the decline from the January 19 peak is essentially impulsive even as the “rally”: from last Friday’s low is corrective (counter trend) and is bumping up against important downtrend lines. So, in a sense, it is a bit of a flip of a coin as to whether the rally of recent days has more life left in it or whether the January-February downtrend is ready to reassert its dominance. If nothing else, recent action has clearly confirmed the importance of support near our minimum objective of 1043.
All that said, we are inclined to look for a bit of a bounce before the downtrend resumes. While the rally is corrective, it does not appear to be finished. We can make the case that the rally is actually a “C” wave or even a fourth wave. Regardless, it appears to be an ABCDE structure and the final “E” is not complete. A move to or through the hourly downtrend line is still possible.
Whether or not that proves to be the case, we continue to believe that the intermediate pressures will be able to withstand any nearby strength. Thus, whether the current rally lasts for another day or another week, lower lows are likely to follow.
Our resistance focus in the period immediately ahead is still on 1104-1105. A rally through that benchmark would do much to lock in the decline from the January 19 peak as a corrective pattern. However, even if a rally through 1104-1105 were to occur, we do not believe that would change the big picture.
On the downside, our main focus is on tactical support at 1029-1020. Since last week’s low was a minimum 38.2% retrace of the July-January rally and since we do not think that last week’s low was the low, it seems reasonable to expect the S&P to take the next step and retrace at least 50% of the July-January rally. That would imply further weakness toward 1010. That would be more than enough to decisively violate tactical support and lock in the entire rally from March’s low as a complete pattern.
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