The past six trading days, including yesterday, have seen the S&P 500 test within one point of 2175, or touch it exactly. Each and every time it has been rejected. That doesn't mean things are bearish, but it does tell us that two percent is all the breakout above 2134 could get before finding resistance. Six consecutive days sends a message that makes us take notice. First of all, a break above 2175 will start another leg higher in the bull market, but it also says the bulls have a headache to deal with.
The oscillators on the daily index charts are looking a bit top-heavy. They are at, or near, overbought with rounding tops. It could mean we pull back some in the coming days, but you know this market. It's relentless to the up side, but some selling would be best for the bullish case as it would allow for more upward pressure. The lower the oscillators the better the risk reward goes towards higher prices. The market has been relentless in its ability to hold at overbought, but it seems things are getting tougher.
It appears the market needs—or would be best served with—a back test of S&P 500 2134. Doesn't have to happen since Ms. Yellen is in charge. What she wants is what we'll get, but it would be wise of her to allow for some selling to offer up better and safer opportunities to the long side. Again, only if we lose 2134 S&P 500 with force would the bullish breakout be in jeopardy. It would have been nice to get a 4%, or more, move above 2134 before finding resistance, but it didn't work out that way. Because it's only 2% it makes the 2134 breakout seem tepid, as any normal pullback would get back to that level very quickly.
Maybe the reason we are stalling some is because froth is ramping up week by week. The new bull/bear spread has us at 32.3%. Not as high as I thought it would be, but once again another move higher on the spread. More and more folks are fearful of missing out on future gains, and, thus, are coming over from the dark side of the trade to the long side. Many may not want to be in, but the fear of missing out has far more weight than any other emotion. Greed rules. The last time we reached these levels on the spread we got all the way up to approximately 46%. That doesn't mean it will reach that high again, but we are at levels that have stopped bull markets in the past.
With the Fed's Yellen doing what she is on a daily basis, it's quite possible we'll need to get up to the 40s once again. That said, you need to at least respect where the spread is and keep it in the back of your mind before getting possibly too exposed. Do what feels right to you, of course, but just recognize there's more risk. Add in those nasty monthly negative divergences, which have never gone away and the risk is there. The bull is alive and kicking but just throwing some bits of reality at all of you to keep you on your bullish toes. There are negatives from froth and divergences so we shall see.
The Fed Chair did her usual nothing yesterday when talking about rates. She talked about how rates will remain low and any hikes in the future will be gradual. The same old nonsense, but she did add one little thing I thought would hit the market lower. Yellen said near-term risks have diminished. Maybe many would take that as hikes are coming, but we know they're not.
The durable goods report was awful yesterday, thus, no worries about hikes any time soon. The Fed seems content with letting the market go higher so why worry, right?!! You should always worry, but it does seem she wants higher markets. For now, she's telling us the same old thing. No rate hikes to come any time soon, and when they ultimately do come, they will be very slow and gradual in nature. 2134 or bust for the market.