Another strong uptrending day was formed in the cash S&P500 market on Thursday. The upward moving price pulse from Tuesday’s low (which is now a price fractal low) of 1460.66 continues. Volume was lower and price movement higher on Thursday which is not a particularly bullish combination. It is often a sign that the rally is “false” unless volume comes back into the market.
From a technical perspective the market continues to show strength. The rally sliced cleanly through both the neckline of the inverse head and shoulders pattern and chart resistance (long term (green) moving average as well as strong chart resistance at the 1490 level).
One explanation of why the volume/movement combination may be a bit weak here is that many times we must come back and “test” the head & shoulders neck line we just broke through. Another potential negative I will be watching here is how the composite index is lagging the RSI on the daily chart. For now though I am long the SPY (from 149.92) in the Investopedia account I opened on August 9 to accompany these blog studies.
Of the three price scenarios laid out yesterday, we can now rule out “B”. We are left with:
A) If the price pulse low of 1460.66 marked a significant low then we should rally until into the week after next.
C) If 1488.94 was not significant then we will make a high over the next few trading days and then pullback for a few days.
The “potential” weakness discussed above leads me to slightly favor “C”. But there is not sufficient evidence to act upon. I will keep my stop on the SPY position at 146.30.
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