A week ago today, we were deep in the hole of the 80-day cycle trough, but we managed to recover about half the losses by Friday.
Overnight, we tested the top of the former balance area at 4472, then reversed back down to 4433. The 4472 level definitively breaks the downtrend line from the all-time high and our key reference line – the 21-EMA at 4440. But failure to hold the levels from the European open increases the possibility of a retest of the lows. The reversal looks like a “V” at the moment with no need for a retest, but we need to take the retest possibility seriously.
The overnight low at this writing is 4427, and further trading below that level would trigger my bear bias, with Friday’s low at 4410.75 being the absolute bull/bear tolerance line. Otherwise, we should be looking for follow-through from the weekly reversal last week.
As to sectors, technology seems to be lagging due to a spike in interest rates at the end of the week. Energy and Financials continue to lead.
My best judgment is that we move up to the old highs but then reverse again to establish a trading range between the all-time highs around 4550 and last week’s swing low near 4200.
The Navigator swing strategy is on the verge of a buy signal but requires a close above the 21-day line to confirm it.
A.F. Thornton