Charting the Markets: S&P 500 Could Be Running Out of Steam
Reversal patterns are showing up with index at all-time highs.
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Stocks were on fire last week even as earnings showed a mixed picture and the Federal Reserve meeting came with little fireworks.
The volatility index fell sharply, and once it plunged through the tough 18% level it was time for the bulls to get to work. However, there are signs this rally could be long in the tooth and may be due for a long awaited pullback. The market is very overbought.
First, we have to look at the chart/technicals to see if there are any clues. Money flow at the bottom peaked and may be turning back down, but it still looks pretty healthy. Candles at the top are still blue and pressing into the upper Bollinger Band, MACD remains on a buy signal which has carried the market momentum of late. But in the top pane the price bar has been narrowing, which may lead us to believe the buying is getting thin. That often happens at/near a top.
With another big week of earnings to come, we'll see if the overbought conditions begin to matter. A pullback should not come as a surprise.
Related: How U.S. Investors Can Profit After Crazy Day for Japanese Yen
