There isn’t much to show in the stock indexes. After the wide range bar up on April 1st (hope it wasn’t an April fools joke) there have been two narrow range bars following. The employment report on Friday should get things moving one way or the other. The chart above is the cash S&P in the upper graph with the standard error bands around a smoothed linear regression curve. The bars are squeezed tight, but you can see the bands starting to turn up on the right side of the chart, and you can see how prices came back almost to the mid-point of the bands in a re-test, and the big bar on Tuesday put prices back up over the upper band. This pullback corresponds with the same area with the moving average lines I had on the Nasdaq and S&P a few posts back. Both indicators are saying about the same thing, and that is the trend is trying to turn up. There are still many pivot points of resistance above. One negative as I see it is the anemic cumulative advance decline line in the lower sub-graph. It has come off its lows a little and is trying to cross its moving average. It would have been nice to see a divergence between the double bottom in prices and the advance/decline line. Major bottoms have often been accompanied by the advance/decline line driving to a low on the first low in prices, and then on the re-test low in prices the advance/decline line turns up from a higher level. (You can see a very negative bearish divergence at the highs in October.) The double bottom seems backwards to me in structure and in view of the advance/decline line. But there is always something to worry about. If all the indicators and the news and sentiment were all positive, the market would probably have been at very high levels and ready to reverse down. Mostly the opposite is the case now.
I still can’t rule out another drive down. This rally could very easily fail. The lows could be tested once more, and if they held, there could be a triple bottom with a more bullish advance/decline divergence. I’m not expecting that, but I have to keep an open mind to it. But the price action so far justifies the baby bull in the box in the upper right corner. I’ve had several emails complaining about that little baby bull. But I defend the choice. A baby can fall down and stumble, isn’t to sure of himself (not to be sexist but I can’t say herself when I’m talking about a bull), and isn’t mature. That seems appropriate to this market. This bull may fail and the bear could be back in the box at any time. If this market can create a respectable uptrend then a more respectable adult bull will occupy the box.