The Sky Has Just Cleared For Stocks In The Short Run

The Sky Has Just Cleared for Stocks in the Short Run

  • Yesterday, I highlighted the seesaw nature of the S&P 500 grind just in time for the intraday bear raid to hit. How much damage has it done, should we pay attention to hanging man candlestick? My article discussed not so smooth sailing ahead in the month of February. Muddling though, yes – start of a real correction, no.
  • Why should it be on the immediate horizon anyway? Quoting my yesterday‘s analysis:

(…) The Fed‘s foot is back on the pedal, but inflation hasn‘t reared its ugly head yet – the path of least resistance for stocks remains higher. Unless the corona vaccination programs disappoint the markets, hurting cyclicals and the breadth of stock market advance, that is. Such a turn would take quite some activist economic policy steps to counter, as you can imagine.

  • In today‘s article, I‘ll shine light upon yesterday‘s tremors, and the S&P 500 sectoral outlook, demonstrating that we‘re merely experiencing another rotation within the ongoing stock bull market. And the stock pickers will also benefit.
  • Now that you know what‘s up, let‘s dive into the technicals (charts courtesy of stockcharts.com).

S&P 500 Outlook

(Click on image to enlarge)

Short Run

  • Long lower knot with the bears temporarily flexing their muscle before the bulls stepped in. Improving volume shows a certain degree of conviction, which is a welcome sign for today‘s session. While the daily indicators are extended, they don‘t support any call for a great rollover to the downside.
  • My yesterday‘s words are valid also today, with us having seen the opening push lower already:

(...) The daily indicators seem to favor largely sideways to mildly higher trading action in the nearest days. That‘s one point of view, with the other being that prices haven‘t declined enough to lure in the buyers yet. Given the volume examination, I lean towards sideways trading coupled with an unsuccessful push lower as the most probable scenario over the coming 1-2 weeks. Then, higher prices.

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Anne Davis 4 weeks ago Member's comment

Good summary, thanks.

Monica Kingsley 4 weeks ago Author's comment

Thank you very much, I'm glad you liked it!