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Although we do not yet have a negative cross-over, it should be noted that the T.O. is stalling, which means the rally may have already exhausted most of its upside momentum.
SUMMARY Last week we said, "We have enough data points to--at least--determine that next week is a significant one; here are the reasons why: 1.
Last week the McClellan Oscillators got to oversold levels. Notice what happened during the previous two OPEX weeks in February and in March under similar technical circumstances. In the first case, we had a 30-point rally, and in the second we had a 40-point rally. So, here is next week's significance: All else being equal, we have a BULLISH SET-UP, assuming that the market is still in a "BULLISH MODE," we ought to get a rally in the SP anywhere between 25 to 35 points. If the price of the SP breaks below channel support, not only will we have a break-down in terms of price, more importantly, the SP will have FAILED TO TAKE ADVANTAGE OF A BULLISH SET-UP, which would signify the likelihood that the SP is NO LONGER IN A "BULLISH MODE" on an intermediate-term time basis. Is there a reason for the market to no longer be in a "bullish mode?" Well, there are two of them; oil is threatening to break out, and the yield on the 10-year note has already broken above resistance and it is targeting 5.40%-5.45%. However, keep in mind that price is always the final arbitrator in all market conflicts, and if for some reason oil goes up, yields go up, and the SP still goes up, do not argue with it! We would like to remind you how our dear friend and invaluable teacher--the one and only, Mr. Bob Kincheloe--always reminds us to stick with the trend and avoid the temptation to get cute by saying to us--when occasionally we get unduly bearish--''but daddy, it's going up!'" This week we got the rally, and the price pattern points to another 15-20 points of rally in the SP. However, there are a couple of things that we ought to be aware of: the NYSE McClellan Oscillator has yet to turn positive, and the Quantifiers--although they turned positive--they have yet to make it above 15. Usually such combination indicates a rally that is internally weak, and thus, it can be terminated abruptly. Stay long, but with tight stops below last Thursday's lows.
Ike Iossif
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