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Last week was the reset of the January 6-month calendar range. For the S&P 500, that range sits at 3770-4000.23.
My prediction for the yearly range is much wider or between 3200-4200. That is based on the position of two critical monthly moving averages.
Looking at the 6-month range, today’s high was 402.64, but SPY closed at 400.52, marginally above the range and well below the day's high.
Also interesting to note is the 50-week moving average, which SPY has yet to clear.
A positive action, yes. The signal to go full-blown long? Not so fast. We'll have to consider what the momentum is telling us.
Before we look at momentum, a couple of other interesting areas of potential importance are ahead of lots of earnings, the PCE number, and a Federal Reserve blackout period.
First off, there are the junk bonds and the 2 ETFs we watch, iShares iBoxx High Yield Corporate Bond ETF (NYSE:HYG) and Bloomberg High Yield Bond ETF (NYSE:JNK).
Both are crucial to the market breadth, closed red, and are underperforming SPY. That makes the exuberance right now suspect.
Note the bottom of the chart. The blue line sits well under the red line-that means underperformance.
Our Real Motion Indicator helps assess growing, slowing, or changing the momentum in any tradeable financial instrument.
As noted by the chart, in high-yield grade bonds, momentum traded sideways after a sell signal (mean reversion) last week.
Circling back to the SPY, momentum reflects the resistance right near the calendar range.
Just under the dotted line (Bollinger Band), we need more momentum to be convinced this rally can continue.
One market that we are keeping a close eye on is small caps. The Russell 2000 is the leader of the Economic Modern Family.
The 6-month January range high is 187.84. iShares Russell 2000 ETF (NYSE:IWM) closed below that level. Momentum tells us that after last week’s mean reversion, Monday’s retest of the Bollinger Band is worth paying attention to.
Bulls need to see more-more momentum, higher prices, and high-yield bonds happy.
Bears need to see more-SPY and IWM falling from here, momentum declining, and high yields bonds continuing south.
Yep, it’s that close.
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