Time is Running Short

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On Tuesday, the S&P 500 posted its third straight gain with a rally of 0.2%.  Breadth was positive by 7:3 and up volume was better than down volume by an 8:5 margin.  Total volume finally increased (by 9%) on an up day, but remains below its  21-day ma.

The daily Coppock Curve is positive for 23 of the 24 S&P industry groups.  While that is a large majority, it broke a string of four straight days (and six out of seven) where the oscillator had a bullish bias for all 24 groups.  It seems likely that, failing a very strong day, Wednesday will see more noticeable group deterioration.  Indeed, by the end of the week, the Coppock Curve could well have a bearish bias for a majority of the groups.

S&P with Daily and Weekly Coppock Curves

We have been making the case that medium term momentum (i.e., the weekly Coppock Curve), which has been deteriorating, would likely withstand the bullish pressures being exerted by the short term rally from the early February low.   With a short term momentum peak seemingly virtually at hand, it appears that the weekly oscillator has, in fact, maintained its bearish bias.  Indeed, it is positioned to remain weak for another 5-8 weeks.  So it does appear that the weeks immediately ahead could prove to be weaker – perhaps much weaker – than the past few weeks.

In a similar vein, it is worth noting that this is the 17th week since the last 20-week cycle low in November.  Since the February low was only 13 weeks into this new cycle, it is unlikely that it was a 20-week cycle low.  If it was, it would be the shortest cycle since the peak in 2000.  Since late 2004, early 2005 this cycle has averaged 20 weeks, and the normal “window” for a low has been on the order of 17-24 weeks.  Since the last four cycles have been below average in duration, it would seem that we are overdue for an above-average – or at least an average – cycle.  Thus, a cycle low may not occur for another 3-7 weeks.  That puts the cycle environment in reasonable harmony with the perceived momentum background.  Together they suggest that we continue to be alert for a test of the February low.

Tuesday’s rally confirmed Monday’s breakout through 110-1116.  This suggests that, in the time left to it, the rally still has the potential to challenge the 1131-1150 range.

Nearby support is at 1112-1105 then 1086 and the 1078-1075 breakout point.  We still regard 1029-1020 as tactical support but, if the S&P rallies directly through 1150, we will have to consider raising tactical support to the recent 1044 low.