Last week the conclusion was that the SP500 is likely to find support in the 1320-1330 area and rebound from there. And that's exactly what happened.
Let's revisit some of the charts, and figure out why there is such a state of confusion about the future direction of the market.
The longer, weekly trend is still up, and there are no signs of trouble there.
If anything, the pull-back that started at the beginning of May has been so far shallow by historical standards, and has not jeopardized the state of the trend yet. The added magenta line clearly shows that.
The daily chart, however, paints a different picture. The downtrend that started at the beginning of the month has continued unabated, and we have a series of lower highs and lower lows. Is there a reason to panic? It all depends on one's timeframe and leverage, of course, but from the point of view of the rally that started in March '09, not yet.
Just like at the end of last week, the SP500 is sitting on support, in the guise of monthly pivots, and there is some added cyclicality that may come into play early next week.
Continuing with the channels, and the risk/reward oscillator, very little has changed in the last few days. The channels are extending sideways, and the risk/reward ratio remains neutral.
This week I'll conclude with the SPY chart, in order to highlight some of the added functionality on my blog.
So just like last week, the warning lights are still on, and we continue to be in a sideways phase.