Last week, SPX traded within inches of its all-time high. After a much better than expected jobs report on Friday, bulls took control and drove the SPX up to 2131.71, only 3 points from the 5/15 high of 2134.72. Some profit-taking occurred in the last minutes, and it closed at 2129.39. This puts it at the very top of the resistance band which has defeated all attempts at making a new high for the past 14 months. Will this one succeed?

To be completely objective, the jury is still out!  By Friday's close, varying degrees of negative divergence plagued all oscillators, from weekly to hourly.  As we know, negative divergence is only a warning that momentum is waning. It does not predict with certainty that the move will end. So we must wait until Monday to see if the bulls will have enough enthusiasm left to drive SPX to a new high. Eric Hadik is expecting cycles to peak around the middle of the month, and with short-term P&F counts ranging from 2136 to 2158, the odds are pretty good that a new high will become a reality. Also, we cannot ignore the fact that the 1810 base does carry an unfilled count to 2240 (minimum).   

Stock market conditions are always changing, so we can only predict with some confidence what lies directly in front of us. Being aware of the existing divergences and short-term count implications, we should reasonably expect that the current rally from the Brexit low of 1991 will end shortly and some retracement will follow. Whether the longer-term projections to 2240 or higher will ever materialize is only a possibility which will have to be determined by future market action.  

Last week, I showed a chart of BPSPX which showed a stark contrast to that of the S&P 500.  While analyzing it, I mentioned “We'll have to watch it closely over the near term to see if it makes a late recovery. Perhaps there has not been enough time!”

Here is an updated version of the same chart (courtesy of StockCharts.com):  As you can see, it has somewhat improved, but it has only gone from about 52% to 59%, which leaves it showing extreme divergence with its 80% high of April, and the more recent 67% before the Brexit plunge.