SPX and Oil at Critical Juncture
The SPX at the 2050 level looks like a great place for a 'pullback' to begin as indicated in the chart below. There is a potential "distribution topping phase" in which the SPX may pull back to 2000. I see a potential target at 1890.
The price has made a series of lower swing highs and lower swing lows since topping in 2015. There was a big August 2015 sell-off, followed by a rally to a lower high in November 2015, then a sell-off to a lower low in January 2016. The rally currently is still at a lower high than the November 2015 high.
Based on data, provided by Investor Intelligence, the bulls are up to 47.4% and the bears are down to 27.8%. This data has been collected from a survey of newsletter writers and investor advisors. This sentiment has changed very quickly and now points to an 'exhaustion inflection point' in the SPX. This is a rare and excess 'swing' of sentiment within a very brief period of time. It is reflecting that this move upwards is 'unsustainable'!
A topping phase has now started, but know we could see slightly higher highs during this choppy process.
Crude Oil and SPX Comparison Chart:
As long as the WTI Oil does not rally, the SPX will continue its' decline.
SPX and Oil Trading Conclusion:
I feel oil will hold up and bounce for a couple more weeks and help support the stock market. But once stocks lose their upward momentum and oil starts to fall again - look out below!
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