Another failed rally - Trading Week Update

Eventually the Market reveals its judgement, there was a small reaction rally on Jan 24-25. After that, the S&P didn't go anywhere, the Ukraine conflict and the Fed strategy to deal with the inflation risks, keep the Markets in a though position. In my previous post I had mentioned the possibility of a stronger rally this week, today that possibility seems to be remote, the Market is never wrong, eventually there will be a powerful rally, but not today and maybe not this week.

The daily chart is really interesting, with a lot of conflicting messages. The first one is the bullish divergence that I mentioned yesterday (black arrows). The Market got to a lower price but the MACD-H didn't reflect the Bears' force. That's a bullish sign.

The next interesting point is given by how high the price is getting in each pullback. If you look at the red arrow tagged with the number 1, the price got almost to the +2 Keltner Channel (KC). Moving to the red arrow tagged with the number 2, the price barely got past the 30-day EMA (blue line), it couldn't reach the +1 KC. Finally, during this last rally, the price couldn't even get close to the 30-day EMA (blue line) it got past the -1 KC and then stalled. It doesn't mean the rally is over, but at least it looks like it is done. This is a bearish sign.

Finally, one of the reason I think that the S&P still can rally is that the 4,330 support has offered in the past a platform for the S&P 500 to rally (green arrows). The first green arrow, back in Oct/06/2021, was an important rally. After that, no rally has lasted more than four days before stalling or pulling back.

S&P 500, daily chart, you can click on the image in order to zoom in

The numbers for the New Highs and New Lows (NH-NL) deteriorated a little bit. I interpret the numbers from the last few days as less selling pressure, but still not enough demand in order to move the S&P up in a significant way. The trading week is just starting, the negative news might keep coming during the rest of the week, it's a good idea to keep reviewing that your risk management techniques are in place in case that the situation worsens.