Despite what seemed like a very strong day price-wise, S&P failed to take out areas of importance which would have turned the trend bullish. The move over yesterdays’ highs did in fact allow for early day acceleration, and S&P got up to 2659 before reversing nearly 20 handles into the close to finish right near former highs from Wednesday. Breadth finished at a respectable 4/1 bullish, while 6 sectors finished up over 1% and all sectors were GREEN except Real Estate.
OVERALL, its TOUGH to enter the month of APRIL BULLISH just yet.. as near-term momentum became overbought on hourly charts.. while Daily and weekly momentum are NEGATIVELY SLOPED, while the market (S&P) also still lies in a downtrend from 3/13 highs. There has been no trend breakout and most short-term cycles pinpoint April 3-6 for a change in trend, which I believe should be a LOW, followed by a move higher in the subsequent weeks throughout April into May-
However, the fact that prices rose as much as they did helped to turn momentum UP on 240 min charts.. which means that any “backing and filling” likely could create the kind of positive divergence in momentum that will allow for a low to be formed next week. The Alternate scenario is S&P simply presses up above 2660 and its off to the races.. which I doubt is the case.. but cannot be ruled out completely. The factors of near-term bearish sentiment back in the market (AAII- more bears than bulls), and bullish seasonality for April, coupled with Short-term oversold conditions into this week while the larger weekly trends remain intact.. all these are positives which suggest buying dips. The negatives of the huge momentum and breadth drawdown from late January are definitely concerns.. but until Feb lows are broken, it looks right to take a stab at thinking stocks move higher in April. However, this will require some evidence of breaking out of the downtrend at hand which is near 2660 and getting up above Tuesday’s highs at 2680 would help add conviction. Until that happens, the odds on favorite is for an early week retest of lows yet again, but which this time around, should be buyable. One should keep stops tight near Thursday’s highs, but not wrong to have a few shorts after Thursday’s move.. (IWM QQQ) and expect some consolidation early next week before lows are in.
S&P HIT 2659, then fell to 2644 with a few min shy of 4pm. At present, we’ve sold off further down to 2635, near yesterdays highs. TRENDS remain bearish , and while Today/Thursday was constructive. Additional work needs to be done.
Yields have now fallen around 20 bps from a month ago in late February. Movement down to 2.70 is likely and its right to stay long Treasuries and hold off on taking profits until 2.70-5 is touched. This should take another 1-2 days.. but a stalling out in yields and turning higher could very well coincide with equities also beginning a more meaningful advance.