US Stocks Push Relentlessly Higher

After the S&P 500 (SPX) 01/26/21 all-time high it appeared a decline lasting at least two weeks with a minimum retracement to SPX 3660 could be underway.  Both targets failed to be reached as ravenous bulls viewed the paltry drop a buying opportunity.

The daily SPX chart courtesy of Trading View illustrates RSI Bearish divergences.

As of 02/05/21 there’s a quadruple bearish RSI divergence.  Normally there are not more than triple divergences. This extraordinary number of divergences implies in the near-term prices could continue to climb.

The hourly SPX chart reinforces this assumption.

The hourly SPX -RSI reached its highest level since the rally in late January began.  Stock indices almost always have at least one RSI bearish divergence before there’s  a decline.

The daily NYSE new highs chart courtesy of StockCharts.com illustrates bearish internal momentum.

While the NYSE new highs have broken above the mid-January bearish divergences it still has a divergence vs. the early January maximum.  Usually there are at least two bearish divergence over a period of several weeks before a significant highs is in place for US stock indices.

The daily Bullish Percentage chart illustrates a broader based bearish divergence.

The Bullish Percent Index  is a breadth indicator based on the number of stocks on Point & Figure Buy Signals within an index.

When analyzing the Bullish Percentage Index, patience is required. It normally can take several months and many bearish divergences before a major stock top is in place. The current reading indicates the SPX is probably in the late stage of its rally that began in March 2020. There’s a good chance more bearish divergence could occur before a final price peak is in place.   

Since March 2020 US stocks have been in a major spike up, moving higher and faster than any rally since the Dow Jones industrial Average bull market in the mid- 1930’s.  What’s happening in early 2021 could be a price spike on top of a price spike.

In  the near-term,  declines may only last a few days.  Major Fibonacci SPX resistance is at 4008.  The US stock market bull move since March 2009 will be a Fibonacci 144 months in March 2021.  Perhaps a major peak in the low 4000 area could be made in March 2021.   

Traders are short 50% non-leveraged SPX related fund since the open on 01/07/21, with a stop loss on half the position at SPX 3900. Continue holding short.   

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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