"I'd like to be
Under 4,160
In a weakly bouncing market, with you…" – Phil & Ringo
That's the song we've been singing since late last month as, again and again, the S&P and the other indexes fail to break over their weak bounce lines.
HOPEFULLY (not a valid trading strategy), we are consolidating for a move higher but, as I warned back on May 13th in "Flip Flop Friday – Stocks Cheer Up for no Particular Reason":
As you can see from our S&P 500 chart, there's been a lot of damage done since the Death Cross last month but it's only within our predicted range – nothing to shake us out of our overall strategy. We anticipate the 4,000 line (blue) to evenually settle down as the middle of the range between 3,680 and 4,320, where the S&P should consolidate into July earnings reports and then we'll see how they go.
That means it's not likey we recover to more than 4,320 and, if I'm right, we'll see upside resistance at 4,000 and very strong resistance at 4,160 (weak bounce). That will bring the 200-day moving average down to 4,320 around the end of June and the 50-day should then be down at 4,160 and we'll just have to get used to the lower trading range.
So here we are, a month later, and yes, that 4,160 line has been very strong resistance indeed BUT the way we have been hugging that 4,160 line has slowed the descent of the 50 and 200 dma, which is buying the market a bit more time to regain its footing. At 4,100 (average) we're 120 points below the 50 dma so we're dropping 120/50 (2.4) points per session and that means the 50 dma will cross below the Weak Bounce Line (4,160) in 25 sessions – or just over another month – say July 15th.
So we have 5 weeks for things to improve or the technicals will be significantly worse for the rest of the summer…
