The S&P 500 made an all-time closing high on Friday ahead of the long holiday weekend. It’s a good time to review the charts and put recent price action in the index in perspective using multiple timeframes.
The monthly chart shows an 82 period cycle between the 2000 high and the 2007 high marked by the vertical lines and suggests the formation of a third cycle high at current levels. Cycle circles mark the cycle lows over the chart period, and there is a common angle of the radii of their amplitudes and the phase of the cycles that intersects with the vertical cycle high lines. This lends support to the current cycle high thesis.
A strong white candle formed on the weekly chart as the index continues to trend higher within a rising channel. This is certainly positive price action but there are also some underlying technical issues. The MacD and the RSI are moving in bearish divergence to the price action, and positive money flow is declining. Price is the final arbiter but these indicators will have to change direction soon to confirm and support further gains.
Money flow on the daily chart is more encouraging than on the weekly timeframe, however overall volume this month has been weak. Friday’s volume, measured on the lower graph as a percentage of the 50 day moving average of volume, was about 30% below the average.
The technical signals are mixed, but they’re always mixed, it’s never easy, and you can’t argue with rising prices. At this point in time, traders should key off the daily chart and the first area of support delineated by the 50 day moving average and the interior uptrend line drawn off the February and April lows, then ultimately the support line of the larger rising channel.