S&P: Weekly Recap and OutlookLast week, the market opened with a gap up that was quickly filled, after which price hovered near the previous all-time high. Bolstered by new economic data, which delivered no negative surprises, bulls pushed the price out of the trading range, establishing a new all-time high.
While this is undoubtedly a positive development that reinforces the bullish thesis, a few warning signs warrant closer attention:
1. Low Breakout Volume: The breakout occurred on significantly low volume. While volume is less critical in indices and ETFs compared to individual stocks, observing below-average volume during such an important event raises concerns about the breakout’s sustainability.
2. Relative Weakness in the Tech Sector (XLK): This deviation signals hesitancy among growth investors, which could potentially ripple through to other market participants.
Additionally, concerns highlighted in my previous review remain unresolved and continue to be relevant.
At this stage, there is no concrete evidence of a sentiment shift or technical signals pointing to a broad trend reversal. However, there is a growing impression that the rally may be nearing temporary exhaustion, which could lead to a significant pullback.
Key Focus for the Upcoming Week
Investors will be closely watching the employment data, which has already hinted at labor market weakness. If new data further support this trend, it could heighten bearish sentiment.
Price action this week will likely provide important clues:
• Bullish Confirmation: If the breakout is followed by a swift continuation, this will confirm buyers’ conviction and overall market strength.
• Bearish Signals: Conversely, if the price pulls back below 600 or oscillates indecisively around this level, it may signal uncertainty among buyers, creating an opportunity for short sellers to capitalize.
