A Lot of Nothing
The S&P500 did a lot of nothing last week, continuing 2017’s trend of doing even more of absolutely nothing. That is unless you consider consolidating sideways and allowing the overbought, negative divergence to unwind something. As you can see below, the SP500 has been sandwiched between 2,240 support and 2,280 resistance since the year started because traders are stubbornly sticking to their positions. Prices move when people change their mind and right now bulls are staying bullish and bears are staying bearish. Headlines and economic data no longer matter when people stop trading them.
No matter what happens, we are within spitting distance of all-time highs and only the most stubborn bears are claiming the world is falling apart. The more times price tests a level the higher the likelihood it eventually breaks through. This, combined with the potential bull flag continuation pattern has me expecting higher prices in the near term. Markets tumble quickly from unsustainable levels and right now the market seems quite comfortable here. No matter what the market “should” be doing, when confident owners keep supply tight, prices continue creeping higher.
While I am optimistic, one thing does provide me pause, current sentiment. As we know, sentiment is a contra-indicator and while advisors have reigned in some of their bullishness since the start of the year, it is still too high yet to be a tailwind to higher prices.