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Complexity Lite

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Editor's Note: The following analysis was offered this morning via Scott Reamer's technical service. We share this vibe on the 'Ville with educational intentions only. For more information regarding Scott's unique approach, please click here.

The S&P 500 (SPX) closed yesterday at 1197.26, a level it first touched on May 23. What we have seen since is no net progress in 15 days. The question then is this: is this sideways/slight new peaks action (1) a picture of waning upside momentum and an important peak that will result in meaningfully lower numbers soon or (2) is this a sideways consolidation that is 'working off' the overbought condition and will soon result in meaningfully higher numbers?

Our models suggest the probabilities are squarely on the side of the former; lower numbers and an important peak. Net/net, the last two sessions of price action could have already produced a meaningful peak (the SPX round tripped yesterday giving back all of its earlier solid gains).

But in our last few notes we have suggested that a few paths were probable from around these prices, and those paths remain the same today: (1) current peaks were significant large degree peaks that will create a lasting top and prices could decline meaningfully for the next few months; (2) a shallow decline over 3-5 sessions could then produce a smart bounce toward DOW 10655+/-where we could expect a large degree and important peak to form or (3) the bullish interpretation that prices could correct sideways/down for a spell before resuming a strong upward march to new annual peaks.

We'll continue to watch the short term indicators closely to determine which of the above paths are playing out.

No positions in stocks mentioned.

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