Market Summary:
There is no question, over the past two weeks I have been cautious and have stated quite often that I see risk increasingly skewed to the downside. My momentum/trend model (MOTR) overall has shown significant negative divergence. What’s also concerning is that the SPX continues to grind higher with historically low breadth and below average volume. Additionally, the index has had just one peak-to-trough pullback of 5% YTD (again, historically low downside volatility). As the signals and evidence continue to create reasons to reduce long exposure and become even more cautious pure price action and trend can’t be denied. During yesterday’s session, the SPX hit its 37th all-time high for the year achieving and breaking above the previously identified resistance level of 5600. The MOTR signal has shifted from negative to neutral with yesterday’s action as I now see risk balanced at current levels. I would be strategically long here to take advantage of potential upside while understanding that the likelihood of a reversal is still much higher than most market participants are expressing. As a level, a break below the doji low on Jul 8 (ref 5562) would be extremely negative and create the potential for a deeper move lower.
Trade Support:
5562: Jul 8 low
5529: 10dma
5500: June 20 High
5400: Low/Base of the June 12 Gap
5300: Previous Resistance/Support
Trade Resistance:
5741: Price Projection based on the April 19 low (ref 4953)
