Should I Stay or Should I Go?
Despite Friday's rebound, it certainly felt like there was more selling pressure than reflected by a seven point loss in the S&P 500 index.
If I go there will be trouble
An' if I stay it will be double
So come on and let me know!
"U.S. stocks saw their worst week in nearly two months" reported the media on Friday. Insert belly laugh.
On the week ending May 18 the S&P closed at 1522.75. On Friday the S&P went out at 1515.75. In other words, the S&P lost a big seven points for the week and it gets "reported" as the worst week in nearly two months. This is emblematic of the current psychology on Wall Street – not Main Street.
A seven week winning streak in the S&P may have come to an end, but the Weekly Swing Chart has still not turned down. It has been up for 10 weeks now. That's a long stretch by historical standards. It's a long time for the market not to inhale.
The Weekly Swing Chart which turned up the week ending March 23rd is still up despite last week's seven point loss. Why? Because since the week ending March 23rd no week has seen trade below the prior week's low.
Despite Friday's rebound, it certainly felt like there was more selling pressure than reflected by a seven point loss in the S&P 500 index. There seemed to be a change in character. And in fact there was.
The week before last the S&P closed at the very high for the move at 1522.75. Last week the S&P scored a new high for the move at 1532.45 but closed well off that high.
Moreover, last Monday the S&P tried to best its all-time closing record at 1527 but succumbed to late selling. Same thing on Tuesday. On Wednesday, the index ran up to another new high for the move, 1532.45, when Alan Greenspan – or as he is now referred to by Chinese speculators, Chairman Mouth Say Tongue – warned that the Chinese stock market was going to get stir fried. The S&P dropped quickly shedding 10 points from the session high.
On Thursday, purchases of new homes in the U.S. unexpectedly surged in April. The Bulls used news of the surge – the largest in 14 years – as an excuse to run a buy program. But, they were handed their heads. The programs didn't stick as once again sellers were lined up around the old closing S&P high to hit bids. The index reversed, tumbling from a high of 1529.30 to close at 1507.50, tagging the important 20 day moving average in the process.
The blow by blow was captured on the Buzz and Banter's Scroll where I pointed out a head-and-shoulders topping pattern on the hourlies which projected a move to 1510.
Seemingly against all odds and expectations, and stupefying Boo, Friday saw absolutely no downside follow-through.
Thursday's decline, the biggest since the stab down on May 10th, also saw the S&P find support at its 20 day moving average.
Nevertheless on the hourly chart shown below, the S&P covered a lot of ground, flip flopping around like a fish out of water as it flirted with its all-time closing high. I'm sure it was an exhausting week for many traders. I know it was for me. I suspect the market itself feels exhausted in the short-term as well.
An hourly chart of the S&P last week shows it covered a lot of ground but backed off from the 2000 closing high at 1527. The hourly Neck Line at 1521-1522 should offer meaningful resistance near-term.
The notion of near-term exhaustion is underscored by the Charlie's Angels signal last week. In other words the three tails in close proximity. In this case, the tails traced out by the S&P on Monday, Tuesday and Wednesday when the index rallied up but tailed off to close at/near the lows of the day.
On the May 10th stab down as on Thursday, the S&P found support at the 20 DMA
The Charlie's Angels pattern along with the first weekly loss in seven weeks suggests more consolidation this week.
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