The US Stock market as represented by the S&P 500 futures (ES) had a good rally last week. It overcame the very heavy volume of the prior week. The weekly closed firm and the monthly chart painted another bullish bar for February. Overall, I continue to see strength in the upside for the longer-term. There has been no significant supply that has come into the market. The heavy volume seen during the waning days of February suggested selling entering the market, but this was quickly erased by aggressive buying. The pullback into the low of 1481.75 acted like an ordinary shake out, albeit one with abnormal volume.
While the market is poised for higher prices, we may see a pullback early next week. Friday’s action, although painting a bullish daily bar, showed more rotation than trending during the day. I am also noting some shortening of the thrust, a reduction of volume on the rally, and lackluster market internals. Buyers may be unwilling to chase prices higher without first testing the late February high volume. A reaction back down towards the high volume levels around 1420-25 would not be a surprise. Any further rally up towards 1550 on light volume would be suspect and could trigger a reaction. Alternatively, a lower intraday high could also send the market lower.
A strong drive up and through 1550 would cancel any reaction. In that case, we would reason that buyers just aren’t concerned about supply and we would look for a trip up to the all-time high made on October 11, 2007 at 1576.09 (cash market). The Dow did this last week, closing above it’s all-time high
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