The stock market continued its climb into record territory last week, as I pointed out in the latest Market Week show. The S&P 500 (SPX) displayed strong upward momentum as it rose 52 points to 3221, an increase of 1.6%.
This occurred despite the impeachment of President Trump and mixed macroeconomic performance, including higher than expected housing permits and jobs data, lower manufacturing and existing home sales, and in line third quarter GDP.
S&P 500 (SPX) Daily Chart
Our approach to technical analysis uses market cycles to project price action. Our analysis is that price action in the S&P 500 has been “swamped.” This means that momentum is so strong that the corrective phases have resulted in limited downside.
Nonetheless we believe that stocks will begin to roll over in the coming weeks, as shown on the chart above. This period of risk will likely last into the first week of the new year, with a short term support zone between 3130-3170.
Let’s also look at the chart below for the 30-year bonds, which fell by nearly 2% to 156.16 last week.
30-Year Bond Futures (/ZB) Daily Chart
Based on its market cycles, we believe the bonds are towards the end of their short-term declining phase. As highlighted on the chart above, our projection is for a brief rally as the next rising phase begins. That move into the short term resistance zone should set up another move to the downside, with long-term rates again popping to recovery highs.
For a more detailed analysis of both of these charts, check out the latest episode of the askSlim Market Week show.