Last week, the stock market got into the spirit of Independence Day early, and created its own fireworks! In my last article, I concluded that the bulls could not declare victory just yet, and it must have struck a nerve because, starting on Monday, they decided to show me! The SPX was up strongly every single day, closing on its high at the end of Friday with a 71-point ramp for the week.
That may be just about all you get for now! Instead of following through next week, the odds are that equity indices will have to do a little consolidating before moving higher. We’ll find out as early as Tuesday. After that, another limited move up before a deeper correction into the middle of the month, and the 9-mo cycle low. My thinking was that the SPX was making a correction in the form of a triangle. After last week, I am not so sure, but it could still happen. We’ll have to see what the entire pattern looks like after mid-July.
There are some other factors which support my view: the weekly chart has not yet made a confirmed break out, and both the chart pattern and the indicators need to pull back before they can extend their moves.
The UUP (dollar ETF) may be making a triangle consolidation pattern before going to a new low. It looks like it’s ready to embark on the “e” wave, which would temporarily send the market in the opposite direction.
The VIX looks like it’s ready for a short-term rally; and then there is the MSCI, which responded to the market rally with a big yawn. That index has a pretty fair history of accurately calling the market moves ahead of time. There are more indications, but this is enough to show that I have some good reasons to think that, whatever pattern is made in the end, we may have to wait out the first half of July before resuming the rally.
Let’s look at some charts!