This week the S+P 500 broke to the downside, after failing at support around the 1840 area which defined the previous two swing lows. Frankly it’s too soon to tell if this will turn into something much more, and no one knows with any certainty anyway.
What I’ll be watching for is the potential for a retracement to 1780, which would match the correction experienced in January. There also happens to be an open price gap from February, so there may be a “back and fill” setup here. The rising 200 day moving average will be in the vicinity about that time as well.
The cumulative advance – decline line still looks healthy, very positive year to date and above its previous swing highs. It’s difficult to imagine a scenario where we see a major bear market develop with these type of positive internal readings. Usually we see higher price highs while the advance – decline line makes lower lows. Difficult but certainly not impossible.
The trend matrix this week has turned more market neutral as many of the components are under selling pressure. The number of stocks in the S+P 500 trading 20% or more below their 52 week highs ticked up to 10.8% this week, a decent sized jump from the 6.8% reading from last week.