Price dropped last week to finally back kiss the 20-day MA at 1946.43 and rising but the back test was cheesy. Price should show far more respect to the 20. The upper standard deviation band was penetrated so a trip back to the middle band, the 20-day MA, was on tap, and did occur, even if it was cheesy, satisfying this technical requirement. The bulls score two large volume up days but the one is OpEx Friday on 6/20/14 and the other last Friday, 6/27/14, with the Russell rebalancing, so not exactly ringing endorsements of the upside price move. The higher volume on these two days is more purely technical providing less credit for the higher prices.
The new moon was Friday early morning and markets were weak moving through the new moon as would be expected. Equities recovered into the closing bell on the upside bias caused by the Russell rebalancing. The bulls are salivating at the days ahead since this week is a four-day holiday-shortened week with markets closed on Friday for the Independence Day July 4th holiday. Equities are typically bullish the two days in front of the three-day holiday weekend. Volume dwindles and it may now turn into pure vapor and fumes. Traders return slowly the week of 7/7/14 and some piggy-back vacations, so the volume does not typically pick up again until later in the week or during the week of 7/14/14.
Since a new month, new quarter and the second one-half of the year is beginning, new money typically flows into the market creating lift. Everything is going the bulls way. In fact, many have decided to continue drinking the limitless Fed wine from this weekend all the way into the holiday next weekend. Even Yellen is donning a lamp shade dancing through the halls of the Eccles Building with Fed members following behind in a congo line; all in a drunken glee impressed with themselves that they can create a higher stock market forever.
Many indications such as CPC, CPCE, SKEW, VIX, SPXA150R, Keybot the Quant algorithm's +81 overbot conditions, sentiment indicators and Bob Shiller's CAPE ratio, to name a few, highlighted last week forecast trouble ahead for equities. Complacency is rampant. No wonder the long traders will be staggering drunks all week long buying stocks without paying any attention to the actual ticker symbols. There is no fear or worry. On top of all this fearlessness and complacency, the start of the month and pending holiday bullish seasonality factors only serve to pour more Fed juice into the punch bowl. At the peak of all this joy, perhaps this is when the slap in the head with a 2x4 begins instead? Considering the light projected volume for the days ahead, it is easy to keep markets buoyant to the upside, however, if an event occurs the markets would likely be ill-prepared to handle the negativity and the low volume would exacerbate the bearish impact on equities.
For the SPX starting at 1961, the bulls only need one-half point, to punch up through 1961.50, and the confetti will be in the air with an acceleration to 1963 and 1968 all-time highs occurring quickly. Watch the S&P overnight futures to see if any hint of positivity occurs, if so, put on your party hats since the bulls are likely going to print a new all-time high. The bears must keep the overnight futures negative at all costs. In addition, market bears need to push the SPX nine points lower, under 1952, or they got nothing. A drop under 1952 will quickly drop price to 1949 for a bounce or die market decision. A move through 1953-1961 is sideways action for Monday. The bulls are driving the bus as the markets take on an eerie calm.