As we look at the charts, we note that the S&P 500 is
sitting below significant resistance and is only slightly above its 50-day
moving average (50-dMA). Since this week-long recovery could still be just a
short-term bounce in a longer downtrend, I’ve looked at data from the recent
20% correction that ended 24 Dec 2018. In 2018, there were a couple of bounces
that failed even after a successful test similar to the one we saw last Monday.
(The Index dropped 11% after its second bounce in 2018.)
When we compare the data from last December, we note that
the 50-dMA of the % of stocks advancing (a measure of breadth) at the top of
those bounces was below 48%. A value below 50% on the 50-dMA tends to indicate
correction. Currently, the 50-dMA of Breadth is 53% so I think that this bounce
is likely to succeed. I still think the correction is over.
What to watch? The S&P 500 needs to break above its
2881 intermediate high. Then we’ll probably
see the Index take out the all-time high of 2945, barring unforeseen news-events.
