.SPX Thoughts: What's Going on Next?

$S&P 500(.SPX)$ thoughts:

Market breadth ended the week positive for the first time in over two months. This is a positive development for participants who support the correction being already concluded.

Market breadth is shown in the lower panel by Net New Highs representing the number of stocks making new highs minus the number of stocks making new lows across NYSE and Nasdaq markets.

In prior posts I have highlighted the current correction sharing distinct similarities with the severe corrections that occurred through 2022, including the tendency for relief rallies to encounter resistance at the short & medium moving averages, and the persistently negative breadth.

On the way to developing a bottom in 2022, the S&P 500 progressed through two relief relief rallies with characteristics similar to the sharp rally observed last week. A gap up rally, and a moment of positive breadth (marked by red arrows in the lower panel)

It would mark a moment where history rhymes should this turn out as a relief rally that preceded the correction bottom. I am a skeptic of this rally until breadth sustains positive and the index consistently trades above 4300 for 2 weeks.

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The S&P 500 opens the week positioned at a major crossroads. This range between 4330 - 4400, has consistently served as a point of resistance, most recently rejecting the top of last weeks rally.

In the scenario where the severe correction persists, the moving averages will reestablish as resistance. This is my preferred thought with more decline in the 3950 - 4100 range.

If instead the correction has reached its bottom, we should see a clear breakout of the S&P 500 above the marked resistance level. Sustaining prices consistently above 4300, for me would indicate a higher likelihood that the correction phase has most likely come to a conclusion.

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