The popular averages closed slightly to the downside on Monday amid exceptionally light trading volume. The Markit flash purchasing managers index indicates quite modest growth in manufacturing this month. Meanwhile, the prices of crude oil and gold fell on Monday.
Above is my 3-month chart of the S&P 500 exchange traded fund (SPY). The SPY had been undergoing a long-term rolling correction for over a year. Then the extreme bearish sentiment expressed by media pundits and investment advisers during the early weeks of this year may have resulted in many retail investors unloading stock positions or selling short at ridiculously cheap prices and setting up bargains for those unafraid to take advantage. Their actions may have caused the formation of a beautiful W-shaped double bottom that was completed on February 11.
The SPY met some resistance at its 50-day moving average, then punched solidly above on March 1. There was continuation until the pullback on March 8 followed by a resumption of the rise. The push above the 200-day MA on March 11 provided encouragement. The hesitation seen following that was normal, and the bounce up from that MA was welcome. April had a couple of flat periods with internal vibrations. The bounce on May 6 from the 50-day MA was encouraging. However, the fall back under on May 13 repainted my weekly outlook arrow a cautious yellow. The recent day-to-day seesawing has kept it there.
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