E Will The Confluence Of Technicals Get & Hold S&P Over 3,000... Soon?

Entering the trading week, we were of the opinion that the rally in the major averages from the previous week would find a continuation of that rally. In looking at market breadth/internals, as well as what was expected to be a favorable financial sector reporting season, we offered the following in last week's Research Report:

Based on history, it would appear as though the probability for the S&P 500 to have another positive week is remarkably strong. And don’t forget the seasonal patterns that we recently outlined from this week’s State of the Market video. While the “Sell in May and go away” period is coming to an end, the “Buy the October Dip” is in play."

All Things S&P 500

For the week, the S&P 500 (SPX) finished higher by roughly half a percent. It wasn't a gangbuster week for the major averages, especially with the Dow Jones Industrial Average (DJI) losing all of its weekly gains in the final trading day of the week, and to finish lower on the week by .17 percent. It's important to keep in mind that the DJIA 256-point drop on Friday was largely the result of just two stocks making headlines, and not the good kind. Boeing (BA) and Johnson & Johnson (JNJ) on Friday together accounted for 227 points out of the DJIA's 256-point drop.

The best performing index for the week was the Russell 2000 (RUT), which gained more than 1.5% for the trading week, bridging the gap between small caps and large caps. A lot has been made about the small caps lagging, but I remains of the opinion that small caps will bridge the gap higher rather than find a sustainable downtrend in the S&P 500 or their respective index ETFs. The chart below actually identifies and validates my outlook for the respective index's and index ETFs.

Lately, it has been made clear that market seasonal trends loom large and are undeniable, but are they going to be repeated is the question we ask ourselves as investors. The many S&P 500 charts and market internals that we study suggests that pivots can and are likely to continue. Having said that, the S&P 500 has successfully put in a chart formation that shows successive higher lows. This is typically a bullish longer-term pattern that I like to see. 

The June low was 2,730, August low 2,822, October low 2,855. The index now resides above the 20, 50, and 200-DMA to boot!

With 2-consecutive positive weeks for the S&P 500, I would expect to have seen the number of stocks within the S&P 500 trading above their 200-DMA on the rise. That is exactly what we witnessed this past trading week, indicating market internals continued to improve...

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