Today we witnessed another bullish attempt of a multi-day rally that took the S&P 500 to a closing price of 4,088. In my last couple of articles, I have mentioned that a realistic target for the rally would be around 4,200, which is only 2.74% away.
Another important level that I'm monitoring is 4,650. In order to avoid a downtrend pattern in the weekly chart, the S&P 500 index needs to rally above that level and stay there. That level is still 13.75% away from the current price and is a price not seen since mid-January.
Moreover, the still very distant 4,818 which was the historic high reached before the Correction/Bear Market started is still 17.86% away. Those three important levels I'm monitoring are summarized in the table below.
Graphically that table would like the screenshot below. As I explained in yesterday's post, the green dotted arrows mark oversold levels of the index (-3 Keltner Channel or below). After getting to oversold levels the index usually rallied at least to the 30-day EMA (blue line), which is signaled by the red dotted arrows. If the rally can break decisively the barrier of 4,200 that will be a signal of strength. Just remember that every resistance will offer a certain degree of selling pressure, some are stronger than others. If the demand isn't strong enough to continue the rally, it will stall or pullback.
If the S&P 500 only manages to get to 4,200 it will keep clarifying a downtrend pattern on the weekly chart. Just to add some perspective and an updated chart that I have presented in the past you can see in the screenshot below how the downtrend pattern is taking shape. If there's a rally to 4,650 the pattern will be completely broken. If the index can't get to that level, the risk of lower highs and lower lows will continue.
In terms of the New Highs and New Lows indicator (NH-NL), it's confirming the decrease in the selling pressure. However, there's a balance in power between Bulls and Bears in the indicator. The New Lows decreased significantly on May/13 but there hasn't been a recent significant increase in the New Highs. If the rally is going to continue, eventually a few stocks or Industries need to start leading the way to New Highs.
I'm still not convinced that this rally won't stall before the end of the week. I'm ready for any scenario, that's the advantage of being on the sidelines during a Correction. Whatever happens I'll just follow my plan. Until I don't see a real display of strength from the Bulls during multiple days breaking important resistances, the Correction has a chance to resume its way down.
