A couple of interesting charts of the S&P500, which frame the recent trading action.
Short-term the S&P500 is in a trading range of 1340-1378 and looks to be working off severe overbought conditions with a healthy consolidation. This seems to be the pattern of the 20+ percent move since October – a strong move up followed by a few weeks of range bound consolidation. The bears will seize on the longer term chart and warn the index can’t seem to break through last year’s high.
Nevertheless, the index remains in an uptrend; the market bounced nicely at 1340 support after a sharp sell-off last Tuesday; the declining VIX is confirming the move higher; Greece has now officially defaulted and the world has not come to an end; and global central banks are gushing with liquidity. Our sense, however, is the S&P500 needs to close above 1380 sometime soon before markets get too nervous about elevated oil prices and the China slowdown.
How do our waffles taste?
(click here if charts are not observable)