The S&P 500 along with numerous indices have been screaming higher over the past 90-days. Pre-election fear levels were high and stock market bulls, were hard to find. The strong move up, has some sentiment indicators reversing course, from where they were 90-days ago. Sentiment remains important to us, not nearly as important though, as the Power of the Pattern.
The 2-pack below looks at the S&P 500 ETF (SPY) on a weekly closing basis (left) and Hi/Lo/Closing basis (right), over the past couple of years.
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Without a doubt the trend remains up in the charts above and 1-week’s price action does NOT mean, a trend reversal has taken place.
We do find it interesting that if one takes the “weekly closing highs” last year at (1) and applies Fibonacci to those levels, the 161% extension of the closing highs and lows last year, comes into play at the 238 level. Last week the ratio closed right on the 161% level and may have created a small reversal pattern at (2) last week.
As the same time that the S&P might have created a small reversal pattern the Equal Weight/Cap Weight ratio (RSP/SPY) has been negatively diverging against the S&P 500, for several weeks below.
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