Here is the preview of the coming week on the S&P 500 from Traverse City, Michigan.
The S&P 500 pushed higher in three of five sessions in the past week, but finished with a slight loss of 0.03%, breaking a four week run higher. The index has risen in 91 of the past 144 sessions.
Major Stock Market Indexes
The major indexes, the DJIA, S&P 500, NASDAQ, NYSE and Russell 2000 all appeared to be navigating through resistance levels in the past week and a couple of the indexes finished slightly lower for the week. Although the indexes are all beginning to show possible topping patterns, all have continued to show bullish tendencies during this period.
All the indexes rebounded higher off or above their 13 EMA in recent pullbacks with the exception of one drop on the Dow Jones that fell through the 13 EMA before rebounding strongly to close well above it. Most pushed higher into resistance levels during the week, and even though some slipped later, they appear to be reloading for another test of these resistances.
Most of the indexes maintained within the short term trends higher they had established in the rebound from June 24 lows. Those that had not rebounded more strongly initially, so it appears they are now establishing a lower trend line basis.
Pullbacks seen on most of the indexes during the week appeared to be profit taking, as it relieved the indexes from highly overbought conditions. The indexes are still near overbought levels, but it does not seem unlikely they could continue to trade in or near overbought levels for the time being. It seems fairly likely drops during rounds of profit taking could remain fairly shallow, with pullbacks to or near the 13 EMA probably being opportunities to add.
US Treasury Charts
The prices on the 20 year US Treasury Note slipped early in the week nearing the previous minor support level before rebounding to and then bearishly falling off the 13 EMA on Friday. Although it appears the minor support might have held in this retrace, it is too early to tell and it still seems likely this support could fail in a retest. The chart is also showing a possible basing pattern is beginning. Since this minor support level is the strongest left before a much deeper fall, it does not seem unlikely the treasury bulls would try to hold the line here. So far they have done well, but it seems fairly likely any real rebound in prices would probably be met with a wave of sellers as it would appear to be an opportunity for those that held earlier to exit. It therefore seems more likely Treasury prices would base and not reverse at this time if support holds here. It also seems fairly likely that this basing period could eventually fail. Although this chart does not currently look as bearish as it has in the past, there remains a large downside potential and upside potential appears limited.
The 10 year US Treasury Note interest rate rebounded in the past week before slipping Friday, with the fall dropping to and bullishly rebounding off the 13 EMA. Although the lower trend line in the rebound from the May 1 low was breached on Monday, the chart has since rebounded back within this trend. Even though this chart continues to show a possible topping pattern, it continues to look bullish overall.
The Treasury charts continue to show some signs of a possible trend change, although it also continues to look possible that these signs are failing. Overall the treasury charts maintained within patterns that are generally bullish for stocks.
S&P 500 Constituent Charts
Overall the S&P 500 constituent charts continued to increase bullish tendencies.
Several of the constituents that were in basing patterns lasting over a month broke substantially higher in the past week, some to new 52 week highs.
Most constituents that pulled back with the index during the week maintained within established uptrends.
Many constituent stocks maintained steep trends higher even into the index retrace. Some broke above the upper trend line and have begun to trend higher above it.
Some of the stocks that were in wedging patterns between the 13 EMA and 50 EMA broke these wedges lower in the past week. Some that did have already rebounded higher. It does not seem unlikely these stocks will begin to trend higher now. Several have maintained within these wedges, and some that slipped recently also appear to be forming wedges between the two EMA’s.
Several of the constituents are bumping against resistance levels at the current time. Most appear to be weakening these resistance levels and it seems fairly likely they will break higher through these resistances.
Many of the stocks that pulled back in the past week have reached likely rebound points. Several that reached these likely rebound points earlier have begun to rebound higher.
Overall the constituents are overbought; however it appears a larger number of stocks are beginning to hold in or near overbought levels and it seems fairly likely others could begin to do so later. It seems fairly likely rounds of profit taking could remain shallow and brief for the time being. It also seems fairy likely stocks could move higher in the week ahead.
The -/+90 D indicator expired on Tuesday. The -2% L, +2% H, 100 L, -/+9 Day, +9 Day and 90E indicators are currently active. See a more detailed description of the indicators developed through research here.
Several indicators will be expiring in the coming weeks, and it seems possible several others could toggle off within this timeframe too. Generally a decrease in active indicators shows a decreasing chance of volatility. Periods of low volatility are generally bullish.
The -2% L indicator did not provide a correct indication in the past week. The -2% L indicator will toggle off with the 100 L, provided there are no volatile moves (that of 2% or greater during a session) prior to the 100 L deactivating.
The +2% H indicator did not provide a correct indication in the past week. This indicator will change to a low likelihood in five trading days and then remain in a low state for ten trading days before toggling off; provided there are no volatile moves (that of 2% or greater during a session) during this timeframe.
The S&P 500 continued to pick away at the lower half of the resistance at the 100 L during the past week, with daily highs reaching within less that $2 of the 1700 level twice before retreating. The recent retreat was probably a reloading period for the next push into this resistance level and it seems quite likely the next push higher could fracture the 1700 level. It continues to seem likely a close at or above 1700 would probably break resistance at the 100 L level. It is common for resistance breaks to accelerate the rise in price, so it does not seem unlikely the index could see a spurt higher for at least a few days after this resistance break. It seems possible the sprint higher could last until the first midrange resistance level before slowing.
Even though it seems likely the 100 L resistance level will be broken at 1700 and it is unlikely another significant drop will be seen within this resistance, this indicator will remain active until the S&P 500 closes above 1725, the upper limit of this indicator’s range.
The -/+90 day indicator that became active on March 14, 2013 expired at the market close on Tuesday. It finished the 90 trading day period as follows in the format: highest close / lowest close / last close.
+8.46% / -1.38% / +8.26%
When this indicator became active it appeared possible this indicator would be a dual 90 day indicator. The data suggested it may see a pullback early in its active period, giving it a negative (-) initial indication and this pullback would likely lead to a bullish run giving it a secondary positive (+) indication. The S&P 500 fell initially after this indicator became active and then traded rather flat during the first month. The index then pushed briefly higher before falling to a significant level (3.25% from the highest to lowest closes), which was followed by a fairly bullish run higher. Although the lowest close was not very deep compared to this indicator’s initial closing price, the lowest close was seen on the 24th trading day, during a significant drop and in the early part of the active period. The highest close fell somewhat short of general expectations for a bullish indication on a full 90 D indicator, but the S&P 500 did move substantially higher in the latter part of this indicator’s active period. It would appear the interpretation of data for this indicator was mostly correct in this instance.
The -/+9 day indicator that became active on April 2, 2013 has performed as follows to this point in the format: highest close / lowest close / last close. This indicator will expire in 9 trading days.
+7.98% / -1.82% / +7.73%
The +9 day indicator that became active on June 18, 2013 has performed as follows to this point in the format: highest close / lowest close / last close.
+2.65% / -4.77% / +2.41%
A 90 E indicator is currently active. The expiration periods of two 90 day indicators will overlap and as a result the 90 E indicator will remain active for a total of 29 more trading days. The expiration periods of 90 day indicators have exhibited many unusual market conditions in the past, with most occurrences of this expiration covered in past articles being bearish. However; not all expiration periods are bearish, some have been very bullish. In this instance it seems possible the expiration period could be bullish.
The S&P 500 had a significant pullback within the 100 L resistance level. Although the index recovered from this significant drop, it has not yet cleared the bandwidth of the 100 L resistance, and therefore this resistance level remains active.
It continues to seem likely the bulk of the resistance within the 100 L will be seen before the index reaches 1700. This resistance has slowed the accent of the index, but it appears the index is breaking this resistance level down and it seems possible it could break this resistance level soon. Resistance breaks often lead to accelerations in prices increases and if this acceleration is seen after the index breaks above 1700, it seems possible it could continue until being slowed again by the first midrange resistance level as it works its way past this resistance.
The first midrange resistance level will likely be found between 1735 and 1745 (possibly to 1750). The data suggests that the resistance at this level will probably slow the accent of the index but probably will not cause a significant pullback.
The second midrange resistance level will likely to be seen between 1760 and 1770. It continues to seem possible the second resistance level could hold significant resistance. This resistance level has still not been fully investigated as not all data needed is available at this time; any projections made prior to this data being complete are preliminary and could change over time.
One indicator recently expired and others will be expiring during the coming weeks. A decrease in active indicators is generally bullish.
Timing patterns suggest stocks could continue to rebound due to a large selloff in treasuries. This rebound in stock prices could be very large if the drop in treasury prices continues. Recent patterns in the treasury charts show a possible reversal is beginning, although it also appears this reversal could be failing. Treasuries fell through the last meaningful support earlier leaving only minor support levels and a large gap lower before meaningful support would be found again. It seems fairly likely the minor support levels that hold in this drop could fail in a retest.
There continues to be many reasons to be bullish at the current time. Any pullbacks seen along the way are probably a good opportunity to add.
Many of these sources of information were used in this article.
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Have a great day trading,
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Disclosure: I am currently about 83% invested long in stocks in my trading accounts. The increase in the investment level over the past week was due to the purchase of two issues with the cost of these purchases partially offset by the proceeds of the sale of one issue and dividend payments. I consider myself oversold at the current time; however I have and will continue to sell stocks that reach long or short term targets. I will also continue to add stocks I feel are at a great value mainly through day and short term buy orders. I will receive dividend payments from 12 issues in the coming week and 4 in the following week. If I make no further investment changes during this timeframe these dividend payments will not change my investment level.
Disclaimer: What I provide in the Stock Market Preview is my perception of the current conditions and what I think is the most probable outcome based on the current conditions, the data I have collected and the extensive research I have done into this data along with other variables. It is intended to provoke thought of the possible market direction in my readers, not foretell the future. I do not claim to know what the stock market will do. If the stock market performs as I expect, it only means I am applying the stock market history to the current conditions correctly. My perception of the data is not always correct.
This article is intended to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.