Its no surprise to see the S&P 500 pull back a bit. On Wednesday of last week, I noted that the ValueTrend Bear-o-meter was on the cusp of moving into bearish territory. Here’s the blog.
Further evidence for a correction: If you look at the chart below, you’ll note that 2800 was a key resistance point for the S&P 500. Right on schedule, we recently saw the S&P hit just under that level. It would appear to be rolling over from that key level of overhead supply. Next point of support is about 2700.
Despite the current noise, there’s really nothing to indicate a change of significance is in the works. If you read my blog on the Bear-o-meter reading from last week, you’ll note that the indications of its readings are for a correction of small magnitude – something that appears to be starting up as I write.
I’m not concerned about this correction. Thats because the macro trend and breadth indicators I look at are largely bullish – while it was really only the more “whippy” indicators in the sentiment group that were flashing danger. For example, the put/call ratio and the VIX reading may only remain in the danger zone for a few days or so before returning to their neutral zones. In fact, both have reversed since my blog last Wednesday. Again—see the charts on my last blog. So, yes, a correction is indicated. But that means a correction….not a change in trend.
Until and unless the primary trend indicators of a lower low on the weekly chart turn bearish (ie a break of 2600 on the S&P 500) AND a break of the 200 day SMA (currently around 2655) – we must remain longer termed bulls. Anything can happen. The market might tread water from here – or it might take out the primary trend indicators noted above. But for now, there’s no sense in playing the “guru swami fortune teller”. You and I don’t know what’s going to happen, but we DO know what’s happening now. The major trend is up, with some current overbought conditions suggesting a near-termed correction. I expect to spend a bit of cash so long as the correction proves to hold above 2600. BTW–for those who prefer a more precise level than my typical “rounded off” numbers, primary support of the last significant weekly chart low is 2580 – so that is in fact the level I will be concerned about should a crack appear…but call it 2600 to keep things simple!