Evidence Building of a Potential Intermediate Low

The question becomes, can bulls maintain momentum?

Technical Edge — 

• NYSE Breadth: 92.5% Upside Volume

• Advance/Decline: 83% Advance 

• VIX: ~$31

Game Plan: S&P 500

Traders are starting to wonder about the validity of a low being in. That’s after Thursday’s bullish reversal, (and despite Friday’s setback), Monday’s big rally on strong breadth and now (potentially) Tuesday’s follow-through with the S&P futures up almost 2% at 8:00 a.m. ET.

The markets are climbing notably this morning, but bonds and the dollar are not really moving. That’s…interesting given the correlation lately.

At some point, bonds will need to go on a more sustained rally — even if it’s into resistance. The TLT is down in 12 of the last 13 weeks and the /ZB is down in 11 straight weeks. That trend can’t go on forever and the eventual rally should bode well for equities.

I’m going to keep today’s piece short. We’re still VIX $30+ and I just want to look at the S&P 500. The UUP/TLT portion from yesterday remain unchanged, IMO.

S&P 500 — ES 

The ES cleared short-term resistance and got to our 3710 to 3725 target. Now trading 3750+ bulls need to see 3685 hold as support. On the upside, 3800 to 3820 is in play if bulls maintain momentum. 

The problem though? We’re coming into the day up 80 handles. That’s tough to navigate from a trader’s perspective.

That 3800 to 3820 was resistance earlier this month, but it’s also where the 10-week moving average comes into play:

Above the 10-week could open the door toward 3915 — which is the 50% retracement of the current down leg, the 21-week moving average and a prior support level. (It stands out on the daily chart as well).

The weekly setup looks rather constructive if I’m being honest. A 5-wave move down to the 200-week moving average, 50% retracement and the prior breakout area. As you know, I have wanted a test of this area for some time. I wasn’t sure on what the reaction to this area would be, but so far, I like it. 

S&P 500 — SPY