Last week's indicator update suggested that we remained in a range bound market, with the low 900 region in the S&P 500 Index as resistance and the low 800 area as support. Once again, the ball was in the bull's court, the update indicated, and once again, we saw a continuation of non-trending action across most sectors, with few stocks in my basket showing decisive upside or downside movement.
One area of strength was the small cap stocks, and this showed up as firmness in the Cumulative Adjusted NYSE TICK (bottom chart) and the new 20-day highs/lows (middle chart). Although the S&P 500 Index closed its week off its highs, the broad market retained much of its strength, as we've seen a relative absence of aggressive selling pressure. At this juncture, the Cumulative Demand/Supply Index (top chart) is overbought, in a region where we normally see corrective movement to the downside. As long as we see peaks in the Cumulative DSI at successively lower price highs, it is premature to conclude that we are free of the bear's grip.
Nevertheless, seasonal tendencies are providing a measure of firmness to the indicators, with a multi-month high in the new highs/lows measure. We continue to trade within a broad range, frustrating bulls and bears alike; ultimately, I expect any continued inability of stocks to sustain a move above the 900 area resistance to lead to a test of the range lows.
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