Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
The major indexes have stalled out the past two weeks after yet another furious V shaped rally off the late June lows. Back in May we had noted how overbought some of the major indexes were both on weekly and even monthly time frames versus their upper Bollinger Band® (the S&P 500 and NASDAQ were actually completely over – a very rare event) and we are in a similar condition right now. If that will lead to another moderate correction or simply marking time sideways / grinding up is still to be seen. But whatever the future holds we can see below why the indexes have had a tough time here.
One item to note here – on the weekly S&P 500 chart the MACD indicator had a bullish crossover around he turn of the year – that stayed consistent until early June. Generally that is a bad sign and in this case in a QE market it was valid but only for a matter of weeks before the next V shaped rally took place. Not that this is unusual, these bearish MACD crossovers on the weekly usually signal a quick and sharp selloff but then almost immediate recovery during QE. Contrast that to 2011 when the market was without QE and we saw a more typical (severe) reaction – of course Euro crisis 2.0 was also happening.
This newest rally has created a bullish MACD crossover (barely) for now but this is happening as the index smacks its head against the above mentioned resistance.
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