The S&P 500 finished Friday at a record high of 1900.53 also being its first close above 1900. The index pushed higher in four sessions, breaking a two week drought by finishing the week with a 1.21% gain. The index has increased in 20 of the past 29 sessions.
Average daily volume levels decreased 8.84% compared to the average daily volumes of the previous week. The week’s largest volume was seen during the week’s lone retreat on Tuesday, with the lowest volume seen on Friday. The five day volume variance decreased 0.37% over that seen in the previous week to 25.51%.
After the S&P 500 began the week higher on Monday, Tuesday’s pullback again found support near the 1865 upper level of the Midrange Resistance Level (MRL) with a rebound at 1868.14. The index has moved progressively higher since, showing continued bullishness. Thursday’s low appeared to find support near the 1883 resistance within the 100 L, rebounding at 1885.39 after retreating from Wednesday’s close of 1888.03, and Friday’s move higher broke and closed above the 1897 resistance with the push to record highs.
The last trading day before a long holiday weekend often sees the index’s price retreat, as many investors move to the sidelines to prevent a news event in foreign markets from stymieing the market when US markets are closed for the holiday. Friday’s price increase would appear to show a heighten level of investor confidence that stock prices could move higher.
Major Stock Market Indexes
The index charts of the Dow Jones Industrial Average, S&P 500, NASDAQ, New York Stock Exchange and Russell 2000 continued to show bullish signs. All five indexes have pushed higher in five of the past six sessions with the lone setback coming during a lower finish on Tuesday.
The Russell 2000 continues to lag in its rebound. Although the current high fell somewhat short of the previous cycles high, it finished the week near this high. A break above the previous cycle’s high would give it two higher highs in a row.
The NASDAQ again pushed to highs higher than that seen in the previous cycle and is near to establishing an uptrend. The NASDAQ broke and closed above the 50 EMA on Thursday, with Friday’s continued move higher gapping above the 50 EMA. It finished the week with its highest close since April 3.
The S&P 500, Dow Jones and New York Stock Exchange pushed and close above their 13 EMA’s on Wednesday and appear to beginning a trend higher above this indicator.
The S&P 500 also broke above resistance at 1897 on Friday, finishing above the century mark at 1900 for the first time. It finished above resistance at 1883 in four of the past five sessions. The index also found support near the 1883 resistance with a rebound above this resistance during a retreat on Thursday.
Current conditions make it seem likely the indexes could move higher in the week ahead.
US Treasury Charts
The 20 year US Treasury Bond slipped in three sessions, falling and finishing below the 13 EMA on Wednesday and Thursday before rebounding back above it on Friday. The 20 year Treasury price has fallen in nine of the past 15 sessions. The three gapping moves higher during the previous week now appear to be inconsistent with price movements over that 15 day time period. Treasuries saw little price movement higher after these large opening gaps and upward price movement during normal trading hours appeared to lack sustainability in the other three sessions with moves higher. This chart continues to be bullish, but is now showing signs of faltering. Treasuries have fallen from fully overbought conditions, but are not yet oversold.
Long term Treasuries price charts continue to look bullish. This is a somewhat bearish indication for stocks.
The interest rate on the 10 year US Treasury Note pushed higher in three sessions during the week. It was turned back at the 13 EMA in Thursday’s climb higher and slipped into Friday’s stock rally, both being somewhat bearish. At the same time a continued move higher after a rebound near a bullish support and an increase over the previous week are bullish indications. This chart is still near oversold conditions.
Gold slipped to about 1291 early Sunday night before beginning a rebound before the Hong Kong open that carried gold higher to finish the night at about 1295.
Monday morning saw gold level off in Hong Kong before spiking higher to about 1301 shortly after the London open. It bounced slightly higher to about 1303 before slipping back to 1300 before the New York open. Shortly after the New York open it spiked higher again to about 1305, but that spike turned into a long downtrend falling steeply initially then more slowly as the night progressed until it bottomed at about 1291 shortly after the Hong Kong open. Gold rebounded from that low to finish the night at about 1293.
Tuesday saw gold begin to trend lower reaching a low of 1286 shortly after the New York open. It bounced back to 1289 and traded flatly until spiking higher to a little over 1296. After a few bounces lower, it began a flattish trend lower reaching about 1293 by mid-session in Hong Kong. It later rebounded to finish Tuesday at about 1295.
Gold trended lower for most of Wednesday reaching a low of about 1283 on the New York Gobex. It rebounded quickly to about 1293 and then traded mostly flat to finish the night at about 1292.
The flatness continued early Thursday before gold began a trend higher in Hong Kong that reached about 1297 shortly after the New York open, where it spiked to 1303 then trended fairly steeply lower to 1294. Gold continued a slight trend lower, but traded very flatly within a point or so of 1294 before rebounding late in the Hong Kong session to finish the night at about 1295.
Friday saw gold trend lower to 1288 shortly after the New York open and then spike back up to 1294 in early trading. It trended lower to about 1291 and then mostly higher before rounding slightly lower into a New York Spot close of 1292.30, which was just slightly lower than the 1292.90 New York Spot close of the previous week.
Gold appears to be range bound spending the past two weeks within about the same boundaries. Gold spent much of past week trending lower off of spikes higher, giving a somewhat bearish feel to recent trading.
S&P 500 Constituent Charts
Overall the constituent charts continue to show bullishness.
Many of the stocks that turned higher after setbacks a few weeks ago have continued higher and established uptrends. Several have pushed to new yearly highs and several have broken above resistance in moves higher.
Many of the constituents that are in short term downtrends or cycling lower appear be at or near likely support levels.
Several constituents have reversed long downtrends and are now trending higher. If these stocks continue in previously established cycles, they have considerable upside potential.
Although an increasing number of constituents are beginning to hold in or near overbought levels again, the remainders are in a fairly wide range of stages of between overbought and oversold conditions, showing reduced correlation. This is part of the staggering pattern referenced in these articles and is generally a bullish sign. The presence of this pattern generally reduces the size of daily price moves on the index, since not all the constituents are moving into or out of overbought or oversold conditions at the same time. Smaller price moves on the index show reduced volatility, and low volatility is a bullish indication. Although price moves on the index are generally smaller they most often produce an overall price move higher. Once this pattern is fully established, it often sustains for long durations.
Several stocks took fairly steep pullbacks in the past week or so. Many of these were due to earnings misses or reduced guidance. Some have rebounded quickly from these falls, while others appear to be finding support levels. Although earnings misses and guidance reductions are headline grabbers and often cause selloffs, many of the earnings reports contain silver linings that are easily overlooked by investors during early news releases. As a result many of these pullbacks appear to present buying opportunities.
Although the indicators featured in these articles are not always correct, they have been many times and being so they are worth reading about and taking note of.
The +/(-) 90 D and 100 L indicators are currently active. The+2% H and -2% L indicators expired with Friday’s close and are currently dormant. See a more detailed description of most of the indicators developed through research and featured in these articles here.
The +2% H indicator did not provide a correct indication during the past week. The thirty day period that the index normally sees offsetting moves in, expired with Friday’s close. This indicator would normally fall to a low state for another five trading days due to a small chance that a market move of this proportion could happen during the fringe days around the expiration date. However, current market conditions make it seem unlikely a move higher of this proportion would occur in this instance and therefore this indicator was allowed to fall dormant early.
The -2% L indicator did not provide a correct indication during the past week and expired with Friday’s close. This indicator is now dormant.
The +/(-) 90 D that became active on Feb 21, 2014 has performed as follows to this point in the format: highest close / lowest close / last close.
+3.50 / -1.12% / 3.50%
The S&P 500 has closed above the resistance found within the 100 L at 1883 for three consecutive days and in four of the past five sessions. Generally three consecutive closes above a resistance level tend to show the resistance has been broken, however the index had closed above this resistance for three consecutive days earlier on April 1 through April 3 but succumbed to this resistance again.
The 1883 resistance has been formidable. Since March 6 the index saw 13 daily highs and six closes fall within three points of the 1883 resistance level. Only 23 daily highs moved above it and the index closed above this level only 13 times during that 56 trading day stretch. As a result, the resistance has caused the index to move virtually sideways for over two months. The sideways move had taken the index near its lower trend line in the rebound off March 2009 crash lows. Rebounds off or near this trend line have consistently moved higher, making it seem fairly likely the current move higher could continue.
So far the 1883 resistance has offered support for five daily lows within three points of the resistance. Only two of these supports were found above this resistance level, the latest being on Thursday. The other was on May 14, but the index fell and closed below the 1883 resistance on May 15, whereas Friday continued higher off Thursday’s rebound. Rebounds found near prior resistance are often bullish indications.
The index rebounded to recover from the significant drop seen within the 100 L. It seems possible the resistance at 1883 has given way, and the index also breached resistance at 1897 in the run higher. The later portions of that run rebounded bullishly above the 1883 resistance resulting in Friday’s push into and close within the upper half of the 100 L resistance. The upper resistance level of the 100 L appears to be softer than the lower level. If Friday’s run broke the 1897 resistance, it seems possible the index could begin to trend higher and break free of the 100 L.
Average daily volume levels decreased 8.84% compared to the average daily volumes of the previous week. Decreasing volumes into runs higher are generally bullish indications. As in the past week, the week’s largest volume was seen during the week’s lone retreat on Tuesday, but again this volume was lower than volumes seen earlier during moves higher. The five day volume variance decreased slightly by 0.37%, remaining in a bullish posture.
The next likely area resistance could be found once the index passes the 100 L at 1900 is in the Midrange Resistance Level (MRL) between 1940 and 1955. The MRL appears to have the potential to cause a significant pullback, but probably not a large pullback if one were to be seen there. It also seems possible the index could move past this level without incidence.
It appears possible the index could reach the 1940 to 1955 MRL in conjunction with the expiration period of a 90 Day indicator. The expiration period of a 90 Day indicator activates a 90 E indicator. Although not always so, the 90 E indicator is potentially bearish as the S&P 500 has often exhibited bearish traits during the active periods of this indicator in the past. Therefore the presence of a 90 E indicator at this resistance increases the chances a significant pullback could be seen. The expiration period also falls within a timeframe that is sometimes somewhat bearish for stocks.
At the same time, the long sideways move at the 1883 resistance appears to have increased upward tensions in many of the constituent stocks. It does not seem likely these tensions could be fully relieved in the relatively short move to the MRL, which could limit the downside potential at this resistance. Although the potential for a significant pullback could increase if the index should reach this resistance with a potentially bearish indicator active and during a potentially bearish timeframe, barring any unforeseen circumstances, it continues to seem unlikely a pullback at this level would be large and still might not reach significant levels.
There is a slight chance that resistance could also be seen at 1970, but this resistance does not appear to have the potential to cause a significant pullback. If the resistance at 1970 is seen at all, it will probably do little more than slow the index’s ascent for a relatively short duration.
There continues to be many reasons to be bullish at the current time. Any pullbacks in stock prices seen along the way are probably a good opportunity to add.
If the index continues within the trend established off the crash lows, it seems possible it could reach the 2000 to 2100 level in seven to 16 months if it reaches this level near the upper trend line and within 34 to 40 months if it reaches this level near the lower trend line. The data suggests the Midrange Resistance Level (MRL) at 2035 to 2055 could hold the resistance level of concern within this range at 2040. More details of this potential resistance can be seen in past articles.
Please note there is no established resistance in the MRL levels before the index has reached these levels. Several instances have proven to hold resistance once reached; however MRL levels that the index has not yet reached are only the most likely levels that resistance will be seen based on research. Back tests of the data used to project these resistance levels work well, but they are not allows exact, and these resistances could react sooner or later than expected, it is also possible the resistance will not be seen at all.
Many of these sources of information were used in this article.
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Have a great day trading,
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Disclosure: Ron is currently about 84% invested long in stocks in his trading accounts. His investment level remained constant over the past week although he bought two issues with the cost of these purchases partially offset by the sale of one issue and dividend payments. Ron feels comfortable with his investment level at the current time and plans to try to stay near this investment level for the time being. However he has and will continue to sell stocks that reach long or short term targets and also continue to add stocks he feels are at a great value through a variety of buy orders. Ron will receive dividend payments from ten issues in the coming week and 18 in the following week. If no further investment changes are made during this timeframe these dividend payments will not change his investment level.
Some of the trades made during the past week may have been due to repositioning investments as discussed in a previous article.
Disclaimer: The information provided in the Stock Market Preview is Ron’s perception of the current conditions and what he thinks is the most probable outcome based on the current conditions, the data collected and extensive research he has done into this data along with other variables. It is intended to provoke thought of the possible market direction in his readers, not foretell the future. Ron does not claim to know what the stock market will do. If the stock market performs as expected, it only means he is applying the stock market history to the current conditions correctly. His perception of the data is not always correct.
This article is intended to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.