Happy Friday,
Here’s something I wrote about this morning, which will help put things in perspective.
Have a great Memorial Weekend and remember what it’s all about:
“A hero is someone who has given his or her life to something bigger than oneself.” — Joseph Campbell
Thank you to all who have given the greatest sacrifice.
Sentiment Check
Last evening, I ran a sentiment poll on X, asking if the SPX’s next 10% move would be up or down.
For some context, here’s how both moves would appear on the chart.
10% up = 6,430, which would be WAY above February’s all-time highs.
10% down = 5,260, which the SPX traded near or below for most of April.
I was hoping the data would provide a clear bias. It did not.
52% of the 303 votes said “UP” and 48% said “DOWN.” I would label this result as “cautiously optimistic,” the most overused market opinion.
Being cautiously optimistic is prompted by a market that’s already in rally mode. People are doubtful that the pace can continue but also don’t want to miss out on any potential upside. The odds are low that that term was uttered too much near the lows.
Further, realizing that ANOTHER 10% gain from here would put the SPX at prices we’ve never come close to before most likely prevented more respondents from being more bullish – even anonymously.
Those who claim to be bearish either believe the last pop was just a bear market rally, nailed the pivot low and took profits and now are waiting for another higher low before deploying capital again or they’re perma-bears.
Regardless, it’s all about how the patterns play out/fail now.
The Response
Yesterday’s response to the SPX’s first 1% decline in a month was a non-event. When this happens, the question is always which side had the edge?
Bears were hoping for the kind downside follow through we saw in March and early April (which could happen today). Bulls were hoping for an immediate and equally strong bounce back like we saw in the middle of April.
Downside risk remains with most daily indicators still stretched, but the longer the market can hang near its recent highs, the greater the chance for an upside resolution.
Support
The SPX’s next clear support zone is between 5,770 and 5,790, which could be tested right away this morning. It comprises various important points: the January low, the March breakdown zone, the late March bounce high point and the 200-DMA.
Slicing through all of those clearly would not be bullish. Beneath that, the most recent pattern breakout (just under 5,700) would be in play. Much more about this is in today’s Pattern Section.
I just recorded a new market video for Premium clients, as well. We go a lot deeper into these themes and other charts.
Have a great weekend Frank!