The S&P 500 (SPX) has continued to power higher, largely unabated, and has now reached the zone that qualifies as a retest of the all-time-high. A lot of folks have now jumped back on the bull bandwagon, because, after all, it's a bull market. However, there are still numerous markets showing that "risk-on" hasn't entirely returned to the menu yet.
Among other things, the high beta indices like the Russell 2000 (RUT) and Nasdaq Composite (COMPQ) are still lagging the blue chips. The chart below shows RUT in the top panel (log scale) and SPX in the bottom panel:
Part of the "among other things" not shown in this update is the chart of the 30-year bond (USB), which is back-testing its recent breakout. I remain bullish on the long bond for a trip toward 138.
SPX is retesting the all-time-high -- a "retest" of an intermediate level isn't an exact price, but is more of a price zone which extends slightly above and beneath the exact price. SPX has also reached a specific resistance point at 1884. At least a near-term correction from here would be pretty normal. In the event there's no immediate correction and SPX breaks the all-time-high, then the red trend line is still the next pivotal resistance level. Take a look at the long black trend line, which began back in May 2013, for an example of a similar pivotal level.
The NYSE Composite (NYA) is in a similar position, and the current price zone qualifies as the next big inflection point. The last time I mentioned the market had reached an inflection point was on April 15, when it bottomed -- I was near-term bullish on that day, but in hindsight, was not bullish enough.
In conclusion, there are essentially three stances one can take as an analyst: bullish, bearish, or neutral. Neutral is probably the least popular with the crowd, because people naturally crave resolution (nobody likes it when an episode of their favorite TV show ends with "To be continued.")
But the reality is: Some markets beg to be anticipated, some beg to be reacted to, and some beg for the patience of limiting oneself to only the lowest-risk entries in both directions. The market has now reached another inflection point, which means it hasn't quite closed the book on either the bulls or the bears just yet. I think bears have a good shot at turning the market here, at least for the near-term -- so, for the moment, just put me down as near-term bearish with "a chance of bigger thunderstorms." Trade safe.
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Reprinted by permission; Copyright 2014 Minyanville Media, Inc.
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