Watch RSI for a Possible S&P 500 Breakout

Here is a chart frequently seen in recent Profit Radar Report updates.

In my humble opinion, it is the best visual nutshell summary of the stock market right now. Here is what we see:

  1. The S&P 500 (NYSEArca: SPY) is at the top of its trading range, just below key resistance. The bold red trend line goes back almost two decades. No wonder the S&P has stalled here.
  2. The percentage of stocks above their 50-day SMA has been lagging significantly. Buyers are obviously getting picky.

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  3. RSI (Relative Strength Indicator) is bumping against its very own trend line resistance. Every attempt to move above has been repelled, thus far.

Summary: The S&P 500 and RSI are at key resistance. A breakout here should reel in more buyers. However, the lack of participation (indicated by the % of stocks > 50-day SMA) cautions that buyer’s remorse will set in eventually and limit up side potential. Failure to break out may lead to lower prices.

Detailed target levels for a breakout (if it occurs), and continued out-of-the-box analysis are available via the Profit Radar Report.

Some recent sentiment readings increased the odds of a (temporary?) ‘pop.’

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

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