The following is just a small excerpt from my latest Weekly Strategy Session (please click on that hyperlink for details about trying it out). which I published for members and 12631 subscribers this past Sunday.
With the S&P 500 Index closing the week out once again above its rising 20-day simple moving average (orange line on daily chart, below), bulls remain in control and one of the only reasons for caution on this specific chart would be the lingering issues we have previously covered regarding the long-term dynamics of the S&P: No 10% standard correction and no 200-day moving average test by price both since the year 2012.
Longer-term issues aside, the S&P is leaning down against the support trendline of the rising wedge pattern I have highlighted in light blue. Two weeks ago, bears made an initial attempt at breaking the S&P down, only to find themselves trapped in yet another round of resilient dip-buying.
Still, I suspect once the S&P more decisively loses its 20-day moving average, on a weekly closing basis, that the pent-up supply will be unleashed and a sharp move lower is likely to materialize. At least, that is the risk to current S&P setup for bulls.
Nonetheless, the resilience of buyers in this bull run cannot be underestimated. On the one hand, this persistent dip-buying should see shorts standing aside until a better spot presents itself to get involved with any type of aggression as a bear.
But on the other hand, as we noted as a key distinction to draw last weekend, just because the S&P is incredibly resilient does not mean longs are making money hand over fist as a general proposition, or anything close to it.
Specifically, the main concern for this market is the action in the Russell 2000 Index, typically a good litmus test for risk appetite, or lack thereof, due to he high beta, small market capitalization stocks with institutional sponsorship which are housed here. While we know the S&P is closing each week out above its 20-day moving average, the Russell continues to clearly diverge by continually testing its major 200-day moving average.
First, the weekly timeframe illustrates the initial but sharp rejection of price down away from the Russell’s highs made earlier this year. A weekly close below 1,082 is still necessary in order to confirm any potential double-top pattern. But the weakness is noteworthy as a sign of a major index struggling even as the S&P continues to print new all-time highs.
Next, the daily chart of the Russell illustrates…
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