Make up your mind already! That’s the way traders are feeling towards the market these days. Whether you are a bull or bear, it’s hard not to be frustrated with how the equity market trades lately with its complete lack of decisiveness. After repeated attempts at breaking through 2,800 in the fourth quarter, the S&P 500 attempted to break through that level once again in late February but stalled right at resistance. Then, in the first full week of March, it seemed as though another roll-over was in store as the S&P 500 saw five straight days of declines taking the index back below its 200-DMA (light red shaded box in chart). Negative sentiment peaked on Friday, March 8th when the much weaker than expected Non-Farm Payrolls report set the stage for a negative open to close out the week.
The weak open on 3/8 proved to be the low point of that sell-off, and in the following week the S&P 500 regained all of its prior losses and traded right back up to the former resistance line. At the close the following Friday (3/15), the S&P 500 even marginally eclipsed that resistance line (provided you had a magnifying glass to see it). The strength from that week followed right through to the next week as the S&P 500 looked to have finally and convincingly broken through that pesky resistance level of 2,816 (green shaded box), confirming that the ‘breakdown’ from the first week of March was a fakeout.
Or was it the rally that was the fakeout? Ever since last Wednesday’s FOMC meeting where the central bank took on a surprisingly dovish tone, equities have once again had trouble. Whether it was last Friday’s sell-off that took the S&P 500 back below the former resistance line or Tuesday’s rally which has now seen its early gains more than halved, it seems as though the market can’t make up its mind one way or the other as the S&P 500 sits right on the resistance line at 2,816 as we type! In the span of less than a month, we have seen two moves (one up and one down) that technicals suggested was the start of a move, and both proved to be false alarms.
Unfortunately, we aren’t getting much in the way of direction from market internals either. The S&P 500’s cumulative A/D line remains strong, but after hitting new highs earlier today, as equities have sold off, so too has the A/D line putting it back below last week’s highs. The fact that the S&P 500 A/D line continues to hold up right near its record highs is definitely more positive than negative, but we’d much more prefer something a little bit more decisive.