How Will Bulls Handle a Pullback?

Three stock setups to watch, plus the dollar, bonds and S&P 500.

Technical Edge — 

• NYSE Breadth: 77% Upside Volume 

• Advance/Decline: 65% Advance 

• VIX: ~$24

Last week’s action was quite impressive on the long side and many measures are lining up for the bulls. But one glaring disappointment is breadth. 

Put simply, almost every major low over the last 15 years came alongside a robust burst of upside breadth alongside a strong reading in the advance/decline ratio. 

For bulls, it’s disappointing that the SPX rallied 6.75% and the Nasdaq rallied 9.4% in two days, yet all we got was an 87/88 day (87% upside breadth and 88% adv/dec) and a 77/65 day. 

For me, I would either need to see a 90/90 day for confidence to build significantly or at the very least, back-to-back 80/80 days. 

The lack of either development does leave me lacking confidence, but as always, we will let price be our guide.

Let’s get to work.

S&P 500 — ES 

I don’t know if we will get it, but I’d love a dip to the 3920 level and the rising 10-day moving average. 

However, if we saw that setup, it would be a very good test for the bulls to see who will take control.

After running into a key juncture at the 61.8% retrace on Friday, a modest dip or a pause would do the bulls some good today. 

ES — The Trade