Out of Order

Last week the SPX hit yet another all-time high. Meanwhile, the FOMC is talking out of both sides of their mouth, with individual committee members talking about the need to tighten policy, while the committee itself continues suggesting it will be — another year(?) or more — before any material shift in policy.

Markets apparently like this. The technical pattern has very little short-term movement to work with. All signs suggest this thing simply keeps going higher.

Presently the SPX looks over-bought relative to most measures. However, volatility has been so low there is not much support anywhere to consider during a retracement.

This presents an interesting technical dilemma. On the one hand, the pattern keeps climbing higher. So, until something changes, the bulls stay in charge and we simply see where this goes. On the other hand, should something material shift, there is not much of a line in the sand where investors have fought over price.

If sentiment were to shift, SPX support levels are currently about 7% and 12% lower than the current price point. There’s just not many anchor points on this wall of worry. A slip, and it’s tough to divine where the stopping point is.

For the week, indications continue to suggest this market keeps climbing. And it certainly can – until it doesn’t. September is historically a volatile trading month – often with negative outcomes. We’ll need to keep an eye on things. Markets do not have a history of simply climbing higher for weeks and weeks without at least a few pull-backs along the way. And, as of right now, markets have been climbing since about May without more than a 3-percent-ish pull-back. This certainly seems like really low volatility; maybe too low.

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