Up Against Resistance With Little Fuel

Published May 8th, 2008 in Technical Analysis Tags: 52 week highs, 52 week lows, AAII sentiment, market breadth, moving average, resistance, seasonality, sentiment, support.

The market is bumping its head against a resistance range from 1400 to 1450. This area was of course, support just a few months back.

Starting from April 18th, I noticed a change in the market tone. Whereas pretty much every single indicator had been flashing buy in January, February and March, one by one, they started to point to caution:

too many stocks above their 10 day moving average
a fourth attempt at the 1400 level
AAII sentiment back to October 2007 bullishness and the ISE call put ratio too high
trading volume low enough to cause concern
78% of S&P 500 stocks above their 50 day moving average
“Sell in May and go away!”
market stretched above its 50 day moving average
AAII sentiment inches even more to bullish excitement
number of S&P 500 52 week highs compared to 52 week lows signals caution

spx support resistance chart mary 2008

The best scenario for the bulls would be for the market to pause here and digest this overbought condition and then continue to move higher, breaking above the flag or pennant formation.