Below are short and long term TA figures. The short-term looks like we are going to break through a small downtrend line and test the previous high, while the LT picture shows that we are in a long trading range, which might or might not break soon.
The only real concern is that even though yesterday, volume was high, we can see that the weekly volume is about 1/3 of what it was early in the POMO days. So, this tells me that investors are not putting too much money to work.
Now, a few graphs to put the recent move into a MF perspective:
First, we can see that the number of days before a short signal is issued is not increasing. This is strange, especially knowing that the S&P500 almost gained 3% in the last few days. Usually, this signal would go up with the MF patterns of most sectors attracting more money in a push to start a new upleg in the trend. It is not. We should take note. This might be sectors rotation.
Also, as shown below, the price uptrends in May and June were supported by the MF, whereas in the last few days this has not been the case. Is this cause for concern? Certainly it merits close watch, because if we have a sell-the-news type of move next week, the 20DMF may issue a signal change.
To validate my hunch that a price bounce is prone to failure when unsupported by MF, I ran a small study of past situations. I looked at situations where the MF was above the 0 line while the S&P500 gained between 2.5% and 3.5% in the past three days. I found 69 such cases. For these 69 cases, the supporting MF was on average + 0.44%. This can be compared with the last three days' MF, which was + 0.21%. How bad is it? We can see below that when the MF support of a price trend is much lower than the average, future price increases are in doubt.
Of course, in the past, we did not have to deal with the debt ceiling issue, so this analysis might not be indicative that next week will be down. Nevertheless, we should be aware of the possibility.
I also show below the different dates after the same MF/Price pattern occurred.
In conclusion, this is not the way new uptrends begin: we need a real thrust of money to move into the market.
