What Is the S&P 500 Saying?

The S&P 500 made a high at 1775.22 at the end of October. Since then it has held near there until Thursday when the Index fell dramatically. This is a pattern we have seen before all summer. Make a new all-time high and then pullback. The pullbacks have been retracing about 60-75% of the previous up leg. If this were to happen again this time then the bears will be happy to see range of 1680-1700. That would also coincide with a trip back through the 50 day Simple Moving Average (SMA) and to the 100 day SMA where it has turned the previous three times. But there is one thing that is different this time. The move higher extended much further. In fact it moved above the dotted trend resistance line

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connecting the previous three tops. A break out. Often when a stock breaks out it then comes back to retest the prior resistance, now acting as support, before launching back higher to continue the break out. This is exactly where price is now. Retesting the break out level. You could also look at this as a consolidation zone after the latest move up, like the green box.

Price is going to do whatever it wants, and with the RSI and MACD rolling lower, it sure looks like it wants to continue south. But best to keep an open mind, often you see what you want to see.

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