Trading Between The 20s And 200s….

For fourteen of the past fifteen days the S&P 500 has been trading between the 20- and 200-day exponential moving averages. Neither side has been able to take control. Boring beyond words. Day after day we move basically nowhere. The volatility is gone for now. I have no idea what catalyst will come along to allow for a breakout, but you don’t know if you can even trust when the move occurs. The 20-day is at 2059. The 200-day is at 2024. When one breaks we should expect a directional move. It should, but who knows for sure. This market has opposing forces working. The bulls have the Yellen. Low rates are here to stay. Yes, we’ll see a rate hike in June, but she won’t be promising anything aggressive after that as the global economic environment is not good. Rates will still be very low after the June hike, so big money won’t likely be running out.

If Yellen promised rapid hikes, one after the other, then the market would simply crash out, but there’s no chance that will occur. So we deal with an uncertain market day after day, but since the spread is only 1.5% the market will be forced to make a move soon, and trust me folks, it could go either way. No new catalyst is at hand, although it’s amazing how one shows up when it needs to. The daily charts are slightly more favorable than not, so the onus remains on the bears to take away the bullish trend. MACD’s have unwound to zero, or below with stochastic’s, and RSI’s all in fine shape. Of course, that guarantee’s nothing as the wrong news can take away the good vibes on those oscillators. Bottom line is for the short-term the focus is on S&P 500 2024 and 2059. Hopefully, the powers that be will show some mercy and allow the market to finally make a move. It can’t happen soon enough for this writer.

One thing that can’t be argued is that the market has handled every drop of bad news out there without blinking. Negative divergences are still there on the monthly index charts. Declining economic activity is still part of the global picture. The S&P 500 is trading near a 24 P/E, while earnings decline. Impossible to sustain one would think. Yellen is telling us that we have the rate increase coming in June. Nothing has hurt this market. I don’t understand it, to be honest, but the bulls are still in overall control. Other than something very unexpected there is nothing else this market should have to deal with short-term that would be considered bad news.