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Why New Highs May Not be Bullish Yet

Draghi will ease! BOJ will ease! Yellen won’t raise rates! Home sales miss! Dallas Fed misses!

$SPX 2000! Yay!

Or so the narrative goes from what I understand. After another whopper of a ‘V’ rally $SPX, $NDX, $DJIA are cranking out new highs. Hardly anyone is buying them, but algos don’t care. Yet there are signs that this move may not be all that bullish yet despite the headline appearance. One chart alone proves that this rally still has quite a bit to prove.

I present the weekly $SPX since the 2009 lows:

SPX weekly

Note that this incredible bull run has accelerated several times in slope, each time producing a new supporting trend line. The latest shallow, but quick, decline did actually break this latest trend line and while markets have reached new highs this trend line has not yet been recaptured. In fact, a closer look at the chart shows that now 3 key trend lines are starting to converge as resistance just above into the 2020 $SPX area:

SPX weekly close

Mind you trend lines can change in relevance, but as far as they are concerned the new highs, so far, mean nothing.

What the market hasn’t done of course since the latest QE round began in 2012 is test its 50 weekly MA, nor its daily 200MA. The former is at 1854.61 currently, the latter at 1874.12 with the big supporting trend line from 2009 heading toward 1830 fast. Sounds like quite a bit of confluence to me yet would not even constitute a 10% correction if it unfolds in the days/weeks ahead.

A break of the white trend line (which held as support during the last quick dip) would likely bring that 1830-1874 test. Currently that trend line is residing in the 1960 area. But note, all of these trend lines, are steeply pointing skyward and it will be requiring ever more aggressive gains to not break them…

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Categories: Daily Market Brief

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