The S&P 500’s rally from late 2016 through February 2017 was like a rocket ride (especially if we consider the overnight election lows for stock market futures).
But because the move was so sharp, the trend line of the SPDR S&P 500 ETF (NYSEARCA:SPY) rally was difficult to sustain.
The chart below is a 2 year chart of weekly closings for the S&P 500 ETF. As you can see, the major market index hit a key price level several weeks ago (point 2) and stalled out. That key price point is $238.42 and also equates to a 161% Fibonacci extension level. For clarification, we highlighted the weekly closing highs and lows (at each point 1), then applied the 161% Fibonacci extension to get to point 2.
The ensuing stock market pullback hasn’t been so bad, but the 6 week sideways-to-lower move broke the rally’s steep uptrend line (red line). We’ve also formed a series of lower highs.
Clearly, the recent highs serve as the 800 pound gorilla overhead. Bulls will need to breakout above that level to resume the rally.
S&P 500 ETF (SPY) Weekly Line Chart
Stocks vs Bonds
Another way to look at this is via asset performance over the past several months. Perhaps the stocks vs bonds trade is due for some mean reversion. In the chart below, it looks like the “large fish mouth spread” is starting to narrow.  This is worth watching in the days ahead.
S&P 500 vs 20 Year+ Treasury Bond ETF (NASDAQ:TLT)
Thanks for reading.
Twitter:Â Â @KimbleCharting
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
