The stock market has sputtered at times over the past three weeks, but Federal Reserve Chairman Jerome Powell’s statements Wednesday prompted the S&P 500
SPX,
+0.04%
to jump above a technical resistance level at 4030 points. The benchmark index is now challenging the declining 200-day moving average (MA) and the trend line that defines the bear market. A strong move above 4100 would break that downtrend line for the first time this year, potentially ending the bear market.
Note that I am not saying an increase above 4100 would absolutely be the end of the bear market but it could lead to that possibility. This current rally has closed the gaps on the so-called island reversal of early September. So the next resistance area is the August highs, just above 4300. The first support area is in 3900-3950, so a move below 3900 would be negative in that it would reverse most of the positive action of the past few weeks.
The McMillan Volatility Band (MVB) buy signal that took place in early October is still in place. Its target is the +4σ “modified Bollinger Band,” which is now at 4200 and racing higher. Equity-only put-call ratios are technically still on buy signals. By “technically,” I mean that the computer programs that we use to analyze those charts are still rating them as “buy.” However, a close examination of the two accompanying charts will show they have not made new lows in the past few days. That is a bit worrisome, for these ratios should be trending lower while the S&P 500 is trending higher. For now, it is only a concern, not a sell signal, but we would like to see these ratios move to new relative lows (below their November lows) in order to re-confirm their buy signals.
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