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At our last market summary at the end of July, the S&P had closed at 2173. In the three weeks since, the index has gained just 10 points, or 0.5%. In the last two weeks, the index has gained exactly 1 point.
Almost all of the gains in the past three weeks came on August 5th, the day when non-farm payrolls were better than expected. The S&P gained nearly 1% that day and has done little since.
Our view has been that US equities are most likely in a final "wave 5" of their 7 year bull market, supported by solid breadth, skeptical long term sentiment and continued macro expansion. That view continues to be validated: SPX, NDX and DJIA all made new ATHs this week, and RUT made a new 1-year high. The trend remains higher. A recent post on this is here.
Strong gains in July are often partially retraced in August and September, months that are seasonally weak and also susceptible to increased volatility. That has so far not been the case: volatility has been persistently low and the indices continue to grind higher. This is why we always distinguish between a "set-up" for prices to move up or down and a "trigger" to indicate that the expected set-up has been activated.
The S&P remains above all its moving averages. With little gain over the past two weeks, it's not surprising that the 5-dma has flattened and the 13-ema is just below it. The likely "trigger" for a retrace will be the 13-ema inflecting lower. It's not perfect, but a when the MACD is declining (lower panel), RSI is under 50 (upper panel) and the 13-ema has inflected lower (lowest panel), a drop in the S&P is usually underway. Right now, only the MACD is weak; RSI and 13-ema are close to confirming, but haven't yet (enlarge any image by clicking on it).