The S&P500 has been stuck in 2nd gear for the past 16 days: where next?

The S&P500 has been stuck in a tight trading range of SPX2720 +/- 20 over the past 16 trading days, with the exception of one day; when the index dropped to SPX2677 but opened the very next day at…. yes you guessed it right… SPX2702. Today the market reacted well to the jobs’ number report, but is -as of time of writing- still stuck in the trading range. No wonder investors have been leaving the Bullish camp over the last two weeks and ran to the Neutral-side and Bears (see here) and general sentiment is stuck in neutral as well (see here)

A simple assessment of the daily chart shows the above (blue box) and what needs to happen for the Bulls to regain control.

  1. Price needs to close above SPX2742
  2. Price needs to close above the upper dotted black trend-line connecting the mid-March and Mid-May highs.
  3. At least two consecutive up days (higher open AND close) since last was May 11

SPX Daily TI.png

Although today the Bulls are hard at work, note the 3rd item I mentioned: there have not been two consecutive up days (higher open AND high close) since May 11.  Bulls and Bears have pretty much been battling it out daily: up, down, up down. Thus the Bulls also need follow through on Monday to increase their credibility or else the Bears will once again take the ball and run with it.

If the Bulls can accomplish these three items over the next few trading sessions in a convincing manner than we have a bull-flag pattern from the SPX2595 low targeting as high as SPX2845: 2700 + (2740-2595) = 2845. But if the Bears take over and close the index below SPX2675 than SPX2600 is most likely next. 

 

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