The End of the Bear Rally?
Weak economic fundamentals say the market should start heading down. But what do the charts say?
When the S&P 500 topped in early 2009, it quickly broke through its 20-day moving average on its way down to lows realized in March. The current rally is showing more strength. It hit an intra-day high of 930.2 on May 8 and then proceeded down. But it subsequently found support on its 20-day moving average (the blue line).
Is the market now consolidating for a big rise or drop? The technicals could go either way.
It could hit 930 again and bounce back down. That would be bearish. The market has been doing a great job of surging on the good news and ignoring the bad. But that can only go on for so long. Yet, it’s not out of the question that the market can continue its irrational climb and break through the 930 barrier.
I believe it’ll drop sooner rather than later and not move significantly beyond its intra-day high of 944 back on January 6. When it does begin to drop, it could revisit the lows of January when it hit 800. But I think it’ll go much lower and test the lows of this past March.
And that will remind people that we’re still in a bear market with lots of unwinding to do before the economy truly bottoms.
