Another Lower High, or Is This the Start of a Bullish Trend?

The positive market action of the last two days might trick some into thinking that the market is resuming its bullish course that begun in March and ended last month. Investor exuberance might be tempered by taking into consideration some of the technicals that indicate this rally could be short-lived:

1. The only major index trading above both its 50 and 200 day (exponential) moving averages is the tech-heavy Nasdaq.

2. The S&P 500, the Dow Transports, and the Russell indices are only barely trading above their 50 dmas and are not close to breaking their 200 dmas.

3. The VIX (volatility index) is trying to poke through major support at 25. If it can break and stay under that, chances for a bull rally improve. (click to enlarge chart, below.)

4. The major indices seem to be making lower highs and lower lows. (click to enlarge chart of S&P, below.) The previous high needs to be broken convincingly for a bullish rally to occur.

5. Volume is light but that could well be a seasonal effect.

Comments

[je:]

This is a hard place to get in. The employment numbers tomorrow could throw us into a tail spin......or cause it to run on up. We are approaching the 38.2 retracement, the upper down trend line and other intermediate trend resistance so I would expect some pullback. But then how much is the question. We will get a gap up this morning that will be support(?).
The RSI just poked abve 50 so is that a bull indicator or over bought in the context of a down trend. The historgram is decling on the MACD which looks bearish
I think we have an inverted head and shoulders on the hourly charts that have a target of around 8600 which is where the 50% retracement is as well as that same inclining intermediate trend resistance. If it makes it that far it would probably be a low risk short back down to the 8087 level where if it goes through we will probably visit the 7600 region. That is just my take.....

Jul 15 09:42 AM

[je:]

Just one thing more -the timing on the 8600 looks like next Monday should that be the case

Jul 15 09:44 AM

[je:]

8600 -so much fofr Monday

Jul 15 03:40 PM