SPX Outlook (3-5 Days): Make or Break into Monday
The market remains resilient and has yet to show signs of reversal. However, this cyclical period is coming to an end. Two time periods for reversal are January 17-21 or January 26-28.
If we continue to rally beyond Monday, we could extend the rally into the latter time period and target 2700.
Summary and Analysis
The early week breakout has paved the way for a low volume, lackluster breadth type follow-through rally.
Overall, there is a finite window which one can be defensive here and attempt to play for a reversal. The first period is 1/17-1/21 which ends on Monday. The second is 1/26-1/28 which lines up with the anniversary of last year’s late January high.
Interestingly enough both last January and this January have acted similar in many respects. We’ll see if this year’s double digit percent rally (over 3 weeks) ends in similar fashion.
This year’s technical situation is far worse than last year given the bearish momentum in weekly and monthly charts and prices are now rallying to test (and arguably break, as of Thursday) key technical resistance that had served to mark formidable lows during the Thanksgiving period.
One interesting observation is that Crude oil, Treasury yields and Equities remain resilient in the short run and we’ve seen evidence of yields attempting to push higher in the wake of a possible lifting of tariffs. Note, at the time of this writing, there has been no agreement, yet stocks have moved up in anticipation. Any failure in this regard very well could serve as the catalyst for a decline at a time when breadth and momentum have slowed during this advance.
For now, it’s right to remain on alert, watching time and price.
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Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.