Our view remains the same; we said yesterday:
“The middle window is the month S&P 500. The SPX is running into the highs of February, March and April 2022 near the 4600 range which is a natural resistance area and may stall the market. Seasonality wise the market is entering into the weakest quarter of the year starting now and turning to October. Our view is that a trading range may develop with a resistance near 4600 SPX and a support area near 4200. This potential trading range could last into October and develop a “Right Shoulder” of a Head and Shoulders bottom where the “Left Shoulder” developed from February to April 2022. The “Head” of this potential “Head and Shoulders bottom” lies at the October 2022 low. SPX was up five months in a row and August is one of the weakest months of the year and that combination could lead to a pullback. VIX remains relatively low and still leans bullish. Don’t see a good setup yet.”
The second window down from the top is the SPX/(TLT) ratio. Markets always try to keep in balance and when out of balance it will go back to the norm. When the RSI for the SPX/TLT ratio trades above 70 (current reading is 82.10) the SPX was near a short-term high. We circled in red on the SPX chart when the RSI of the SPX/TLT ratio was above 70. With a current RSI reading of 82.10 on the SPX/TLT ratio, the upside for SPX would seem limited. We have said that there is a possibility that the Bearish Engulfing pattern high of July 27 (4607.07) may be tested before a pullback begins and that possibility is still present.