As we make our way through earnings season and the spring, it appears the recent correction may be ending. It's a bit early to declare total victory over the bears, but certainly the evidence as provided by the technical condition and charts is pointing in that direction.
The big range we have seen in markets continues, but being toward the top end of it and only a mild overbought condition, there is a good chance here. Naturally, there is the potential for 'scud missiles' to fall from a tweet storm or some messiness in other parts of the world. The uncertainty is something that gets the market unhinged.
Corrections are not long-lasting, usually for a period of 2-4 months. This one is in the fourth month, right on cue. The chop in the S&P 500 as shown on the chart below indicates quite a volatile period starting in early February. The wide ranges from that time frame have narrowed considerably, as we now see that a bottom around the 200 ma has been tested. It appears those tests were successful and higher is the next phase.
Last week's close above the April high was key, but the higher low/high from Friday was more important - confirmation. That's not to say we won't come in a bit, in fact, we may be quite a bit overbought later in the week. This may set up a 'higher low' on the chart again, however, and even a pullback to the 50 MA (which might seem scary to some, but it's just where the markets were five days ago!).
MACD is on a confirmed buy signal now, money flow is positive for the first time in a couple months and building. Price is above the upper Bollinger band® for the first time since January, and the bands have started to trend higher, which is an arrow in the bulls quiver.
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