The US stock market is late in the bullish season with long- and short-term bearish momentum signals, yet the rally continues. Could it rise for several weeks or months without at least a correction? Highly unlikely, at some point all trends end.
On 04/29/21 the S&P 500 (SPX) and the Nasdaq Composite (IXIC) made new -all time highs. This is a potential bullish “Rule of the majority” signal but as I’ve noted before this signal may not be valid in a blow off top. The nature of the April 2021 rally looks like a blow off top.
The daily VIX/SPX chart courtesy of Trading View illustrates a short- term bearish sentiment signal.
The VIX usually makes higher bottoms when the SPX registers intermediate and major tops. In March 2021, the VIX had higher bottoms with SPX all-time highs but subsequently the VIX made a new low. Now the divergence has reappeared – currently a double divergence. Keep an eye on the VIX, lets see if this divergence holds.
The SPX on 04/29/21 opened above the stop loss level of 4210. This was a 50% position from a trade initiated on the SPX open 04/12/21. The total move up from 04/12/21 to 04/29/21 was 2.28%, the loss for the 50% position was 1.14%. A recommendation was made to short 50% non-leveraged SPX related funds on a move below SPX 4114.82. This remains a recommendation.
The very short-term Elliott wave pattern is unclear. The situation could be clarified by 04/30/21.
On 04/28/21 there was a tremendous amount of bearish evidence, and it was stunning to see the SPX and IXIC make new highs. At the 04/29/21 SPX session end there was still a tremendous amount of bearish evidence. The action of US stocks on 04/30/21 could break the back of the bull market.