The S&P 500 has had a very noisy month for August, but at the end of the day, this is a market that is still in an uptrend. I think we’ve got a situation where we eventually take off to the outside based on the idea of the bullish flag that we are currently forming. It does not mean that it will necessarily be easy to hang on to the next move, but at the end of the day, the reality is that the market had a short-term pullback. It seems like we are turning around to show signs of life. If the market were to break to a fresh, new high, then the market is likely to continue to go looking toward the 4850 level, possibly followed by the 5000 level.
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- Short-term pullback at this point certainly will be paying close attention to the 4330 level, an area that has offered a little bit of support.
- As long as we can say above there, I think the market continues to go higher, but even if we fell all the way down to the 4200 level, that is what I look at as the “bottom of the uptrend” going forward.
- Clearly, when traders come back from the summer break/holiday season, then it certainly makes quite a bit of sense that we would see volatility and momentum picked back up.
Further adding more interest to the 4200 level, we have the 50-Week EMA coming into the picture, so I think the market will look at that as a very important level as well. Either way, it looks like the S&P 500 is being driven higher, for no other reason than the fact that yields continue to drop. Pay close attention to the US treasury markets, because if yields continue to drive, that might be reason enough for stocks to go higher. We are through earnings season, so at this point there will be the next narrative to sell stocks to the public coming out of Wall Street. After all, that’s what Wall Street does, sells stocks to the public.
All things being equal, the bullish flag does suggest that we are going to go higher, so I still have quite a bit of interest in going long, so I might approach September more with a “buy on the dip” attitude. This of course assumes that we even get that opportunity.
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