There remain colorable arguments for either side of the tape at this juncture, which continues to make picking a side with conviction a rather fruitless endeavor. The major theme in favor of the bulls has been the series of higher lows clearly printed on the S&P 500 index daily chart since the June 4th bottom at 1266. Beyond that, the bulls put in a slightly higher high last week at 1380 for the first time in several months. In addition, the 50 day moving averages on virtually all of the major index daily charts are now smoothing out after clearly downsloping for several months (far from clearly bullish, but offering light at the end of the tunnel). Many bears, on the other hand, are calling for a repeat of last summer’s crash, and also point to the troubling late-stage base breakdowns in former momentum favorites such as CMG SBUX WFM.
When you consider the bearish arguments in light of the bullish ones, it adds up to a wishy washy scenario where the best bet is to stay selective and trade the range before us. Specifically, the S&P 500 looks to be working through the 1335-1370 area, with slight under and overshoots along the way. To be sure, there are stocks showing impressive resilience, such as the homebuilders and select tech. However, as we have seen for a while now, many breakout plays can fail despite how pretty their charts look when the overall market is still indecisive.
Indeed, cash remains a powerful portfolio position until the layers of this market peel back and become more apparent.