On Thursday, the S&P 500 gained 1.0%. Breadth was positive by a bit less than a 6:1 ratio while up volume outpaced down volume by better than 3:1. Total volume was marginally better than Wednesday’s turnover, but remains well below its 21-day ma. The daily Coppock Curve has a bullish bias for 30 of the 24 S&P industry groups.
S&P with Volume Momentum
In yesterday’s post we said that, while there were mixed signals, we were inclined to look for a bounce rather than a decline. We felt – and still feel – that the corrective rally from last week’s low did not appear to be finished. It is not unreasonable to count the trading range from Monday’s high into Thursday’s high as a “B” wave triangle. If so, this clearly defines the overall rally from last Friday’s low an ABC pattern, with Thursday’s rally viewed as the beginning to the “C” wave. As such, this “C” wave would find Fibonacci and chart resistance in the 1085-1090 area, with second resistance indicated near 1100. Key resistance is at 1104-1105; a rally through that benchmark would do much to lock in the decline from the January 19 peak as a corrective pattern.
On the downside, our main focus is on tactical support at 1029-1020. However, the aforementioned “B” wave triangle is important interim support. In that regard, a breach of 1057 would be viewed as a breakdown and do much to indicate the demise of the current rally.
With all that in mind, volume has lagged badly in recent weeks. Indeed, just as this rally of recent days was beginning to gain some footing, our measure of volume momentum was at levels not seen since March. This followed a distinct negative volume divergence at January’s peak. This divergence, followed by a breakdown to multi-month lows, is viewed as a clear sign of distribution. Given our concerns related to sentiment and intermediate momentum, these volume pressures are further evidence that the recent low near important Fibonacci support at 1043 will be breached in coming weeks.
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