Rally Losing Momentum

Market Overview

Last Monday SPX started to rally from the very opening, continued to move up duringthe whole week, and closed on Friday about 70 points higher.However, during the last two days, it ran into some resistance and experienced some deceleration, only tacking on another 6 points.If it can’t recover its upside momentum on Monday, it could start a correction, although the short-term projection calls for a few extra points. 

The uptrend from 1872 ended slightly above the lower intermediate channel line and was, for all intents and purposes, a back-test of that channel line.A .382 retracement ensued down to about 2020 and, by Friday, we had moved back a few points below that same resistance level.The index may require more consolidation before it can rally a little higher and complete the final phase of the bull market.The short term requires some clarification, especially with some negative divergence beginning to develop at the daily and hourly levels.By the end of next week we should have a much better idea of where we are in this “purported” final phase of the bull market. 

Intermediate Indicators Survey

After going flat for one week, the weekly MACD has resumed its uptrend and is about to become positive.The SRSI has also turned back up. 

The NYSI (courtesy of StockCharts.com) barely stopped declining last week as the McClellan Oscillator moved back from negative to slightly positive.This week, they are both pointing a little higher before the current rally takes a breather.  

(Both 3X and 1X P&F charts point to the current level for a low.)

Chart Analysis

Daily SPX chart (courtesy of QCharts.com, as well as others below).

SPX has exited the black channel and has exchanged it for a much broader green channel.Prices found resistance at the top of the black channel, a level which coincided with the bottom of the blue intermediate channel.After back-testing the bottom line of the blue channel, it pulled back exactly .382 of its uptrend from 1872, an area of strong support which was discussed in last week’s letter.This took it outside of the black channel.Now, it is in the process of back-testing the broken black channel line which may be one of the reasons why it seems to be having difficulty moving decisively higher.