That still doesn’t mean the market is destined to continue marching higher from here, adding to its gains. Indeed, there’s (still) room and reason for a quick profit-taking pullback. Even if we get it though, that’s not necessarily going to be the beginning of a prolonged pullback. It will just be enough correction to bleed off some of the bullish pressure.

We’ll take a detailed look at the situation after looking at last week’s top economic reports.

Economic Data Analysis

The party started in earnest on Tuesday with a look at the Institute of Supply Management’s measure of manufacturing activity for June. We ended up getting more of an improvement than anticipated, but at 49%, the number is still below the pivotal 50 mark. On Wednesday we heard the ISM Services Index figure for June. It climbed slightly, but the improvement to 50.8% is a shift from net-negative to net positive.  

ISM Services, Manufacturing Index Charts

Source: Institute of Supply Management, TradeStation

In both cases the ISM’s economic barometers are most inconclusive, unable to start a long-lived trend in either direction.

The only other data release of any interest last week was a big one… last month’s unemployment rate and payroll growth figure. Following the alarming ADP report from earlier in the week suggesting a sizeable number of job losses, traders were understandably concerned heading into Thursday morning. They didn’t need to be though. In contrast with ADP’s count, the Department of Labor says we actually added 147,000 new (net) payrolls in June, which was enough to drag the unemployment rate down to 4.1%. (The size of the labor force shrunk somewhat last month, but that was still matched by an increase in the total number of employed individuals.)

Unemployment Rate, Payroll Growth Charts

Source: Bureau of Labor Statistics, TradeStation

Everything else is on the grid.

Economic Data Report Calendar

Source: Briefing.com, TradeStation

There’s not a lot in the lineup for this week, and nothing worth showing a preview chart for. The only item of interest might be Wednesday’s release of the minutes from the Federal Reserve’s open market committee in May. It might offer up some insight as to how the FOMC is seeing things right now, interest rate-wise. But, so much has happened in the meantime that it also doesn’t mean much anymore. Whatever the case, the market’s now betting there’s a 68% chance of at least a quarter-point rate cut in September, but there’s no chance we’ll see one when the Fed has a scheduled opportunity to change the Fed Funds Rate later this month.

Stock Market Index Analysis

The daily chart of the S&P 500 below says it all. Despite a somewhat slow start, the index perked up later in the week (following the previous week’s close at a record) to move to yet-another record-high close. The move silenced most of any naysayers that thought the prior week’s bullishness was just a fluke.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

That doesn’t necessarily guarantee the market’s going to keep charging higher. The S&P 500 now sits 7.5% above its 200-day moving average line (green) at 5,846 thanks to last week’s 1.7%. That’s a pretty wide divergence. So, it’s pretty overextended as is, and ripe for some profit-taking. The volatility index (or VIX) is also hovering what’s – for all intents and purposes – an established technical floor around 12.6. This doesn’t say a pullback is imminent, but it certainly makes it tougher for stocks to keep climbing. Trade volume was also fading as last week’s buying continued heading into the weekend. Then again, you’d expect to see participation fade headed into a three-day holiday weekend.

The real worry here, however, is only put into its full proper perspective with a weekly chart of the S&P 500. It’s from this vantage points that you can see how far it’s come just since April’s low. That’s a 30% runup in just 13 weeks… one of the biggest/fastest gains in years.

S&P 500 Weekly Chart, with VIX

Source: TradeNavigator

Granted, that big jump also followed what was one of the biggest and fastest meltdowns we’ve seen in years. So, it wasn’t like the market didn’t have a bit of an advantage headed into the recovery. Still…

Perhaps the biggest thing to notice on the weekly chart of the S&P 500, however, is that even with the enormous rally, the index still isn’t back inside the bullish trading range that has been steering it upward since 2023. There’s room for it to continue moving higher without actually doing anything unusual. The question is just one of pacing, and figuring out how to cool itself off on the way up rather than overheating and subsequently starting a more serious selloff.

To this end, let’s assume the 200-day moving average line converged with the 50-day (purple) and 100-day (gray) moving average lines around 5,800 is the technical line in the sand, should a corrective move take shape.

Here’s the weekly chart of the NASDAQ Composite, by the way. It looks about the same as the S&P 500’s but there is one noteworthy nuance worth highlighting here. That’s the fact that it is back in the middle of the rising bullish channel that had framed its long-term rally beginning back in 2023.

NASDAQ Composite Weekly Chart, with VXN

Source: TradeNavigator

So what now? Let’s assume the bears and would-be profit-takers are going to push back on this effort. It’s just too much to pass up. But, let’s also not panic if-and-when it happens. There’s still plenty of technical support below to bring a quick end to any selling. Indeed, it might actually be a good think to burn off some of this tension first before proceeding higher.

Just bear in mind that stocks are hypersensitive to headlines right now. Traders have pushed stocks up to extreme valuations that don’t last without some obvious and undeniable evidence that companies will earn their way into these valuations. If there’s any inkling that they may not be able to do so, the market could easily change its mind in a hurry.

Let’s just not over-anticipate that possibility either, though. The signs should be there pretty early on of that’s what’s in the cards. As was noted, for instance, the S&P 500’s got a thick back of technical support around 5,800.

That still doesn’t mean the market is destined to continue marching higher from here, adding to its gains. Indeed, there’s (still) room and reason for a quick profit-taking pullback. Even if we get it though, that’s not necessarily going to be the beginning of a prolonged pullback. It will just be enough correction to bleed off some of the bullish pressure.

We’ll take a detailed look at the situation after looking at last week’s top economic reports.

Economic Data Analysis

The party started in earnest on Tuesday with a look at the Institute of Supply Management’s measure of manufacturing activity for June. We ended up getting more of an improvement than anticipated, but at 49%, the number is still below the pivotal 50 mark. On Wednesday we heard the ISM Services Index figure for June. It climbed slightly, but the improvement to 50.8% is a shift from net-negative to net positive.  

ISM Services, Manufacturing Index Charts

Source: Institute of Supply Management, TradeStation

In both cases the ISM’s economic barometers are most inconclusive, unable to start a long-lived trend in either direction.

The only other data release of any interest last week was a big one… last month’s unemployment rate and payroll growth figure. Following the alarming ADP report from earlier in the week suggesting a sizeable number of job losses, traders were understandably concerned heading into Thursday morning. They didn’t need to be though. In contrast with ADP’s count, the Department of Labor says we actually added 147,000 new (net) payrolls in June, which was enough to drag the unemployment rate down to 4.1%. (The size of the labor force shrunk somewhat last month, but that was still matched by an increase in the total number of employed individuals.)

Unemployment Rate, Payroll Growth Charts

Source: Bureau of Labor Statistics, TradeStation

Everything else is on the grid.

Economic Data Report Calendar

Source: Briefing.com, TradeStation

There’s not a lot in the lineup for this week, and nothing worth showing a preview chart for. The only item of interest might be Wednesday’s release of the minutes from the Federal Reserve’s open market committee in May. It might offer up some insight as to how the FOMC is seeing things right now, interest rate-wise. But, so much has happened in the meantime that it also doesn’t mean much anymore. Whatever the case, the market’s now betting there’s a 68% chance of at least a quarter-point rate cut in September, but there’s no chance we’ll see one when the Fed has a scheduled opportunity to change the Fed Funds Rate later this month.

Stock Market Index Analysis

The daily chart of the S&P 500 below says it all. Despite a somewhat slow start, the index perked up later in the week (following the previous week’s close at a record) to move to yet-another record-high close. The move silenced most of any naysayers that thought the prior week’s bullishness was just a fluke.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

That doesn’t necessarily guarantee the market’s going to keep charging higher. The S&P 500 now sits 7.5% above its 200-day moving average line (green) at 5,846 thanks to last week’s 1.7%. That’s a pretty wide divergence. So, it’s pretty overextended as is, and ripe for some profit-taking. The volatility index (or VIX) is also hovering what’s – for all intents and purposes – an established technical floor around 12.6. This doesn’t say a pullback is imminent, but it certainly makes it tougher for stocks to keep climbing. Trade volume was also fading as last week’s buying continued heading into the weekend. Then again, you’d expect to see participation fade headed into a three-day holiday weekend.

The real worry here, however, is only put into its full proper perspective with a weekly chart of the S&P 500. It’s from this vantage points that you can see how far it’s come just since April’s low. That’s a 30% runup in just 13 weeks… one of the biggest/fastest gains in years.

S&P 500 Weekly Chart, with VIX

Source: TradeNavigator

Granted, that big jump also followed what was one of the biggest and fastest meltdowns we’ve seen in years. So, it wasn’t like the market didn’t have a bit of an advantage headed into the recovery. Still…

Perhaps the biggest thing to notice on the weekly chart of the S&P 500, however, is that even with the enormous rally, the index still isn’t back inside the bullish trading range that has been steering it upward since 2023. There’s room for it to continue moving higher without actually doing anything unusual. The question is just one of pacing, and figuring out how to cool itself off on the way up rather than overheating and subsequently starting a more serious selloff.

To this end, let’s assume the 200-day moving average line converged with the 50-day (purple) and 100-day (gray) moving average lines around 5,800 is the technical line in the sand, should a corrective move take shape.

Here’s the weekly chart of the NASDAQ Composite, by the way. It looks about the same as the S&P 500’s but there is one noteworthy nuance worth highlighting here. That’s the fact that it is back in the middle of the rising bullish channel that had framed its long-term rally beginning back in 2023.

NASDAQ Composite Weekly Chart, with VXN

Source: TradeNavigator

So what now? Let’s assume the bears and would-be profit-takers are going to push back on this effort. It’s just too much to pass up. But, let’s also not panic if-and-when it happens. There’s still plenty of technical support below to bring a quick end to any selling. Indeed, it might actually be a good think to burn off some of this tension first before proceeding higher.

Just bear in mind that stocks are hypersensitive to headlines right now. Traders have pushed stocks up to extreme valuations that don’t last without some obvious and undeniable evidence that companies will earn their way into these valuations. If there’s any inkling that they may not be able to do so, the market could easily change its mind in a hurry.

Let’s just not over-anticipate that possibility either, though. The signs should be there pretty early on of that’s what’s in the cards. As was noted, for instance, the S&P 500’s got a thick back of technical support around 5,800.

The market recovered well from the prior week’s concerning weakness… then never stopped recovering. The S&P 500 kept on climbing once it made a bullish intraday reversal on Monday. When all was said and done, the index gained 3.4% last week to close just under a new record high. The NASDAQ Composite did the same. Both have room and reason to continue running as well.

That doesn’t mean the bulls will only have smooth sailing in the immediate future. There’s still plenty of potential for stocks to get rattled, like lingering geopolitical tensions in the Middle East. But, the undertow is most definitely moving in a bullish direction.

We’ll explore the matter in some detail in a moment. Let’s first look at last week’s biggest economic announcements and then preview what’s coming this week.

Economic Data Analysis

Truth be told, while the market did well enough last week, it’s not as if the economy is so rock-solid that traders had no choice but to be buyers. There are still plenty of red flags waving.

Take the real estate market as an example. Although the Case-Shiller index extended its recently-rekindled uptrend in April (not May), the FHFA Home Price Index hastened its slow rollover from its peak in March.

Home Price Charts

Source: FHFA, Standard & Poor’s, TradeStation

This mixed message has at least a partial explanation. It’s possible that FHFA-eligible homebuyers aren’t using this loan program as much simply because prices are so high that many homes are no longer eligible for such loans. This of course would underscore the idea that there’s a firm dividing line between the higher-end and lower-end markets, with a fresh divergence between the two.

And other real estate data at least somewhat says things remain relatively weak. While sales of existing homes edged just a little higher in May after a couple of months’ worth of weakness, that was a just-barely move. Meanwhile, sales of new homes tumbled back to near the lowest levels seen since we finally started to ease out of the pandemic.

New, Existing Home Sales Charts

Source: National Assn. of Realtors, Census Bureau, TradeStation

Both of these data sets — alone or together — of course confirm that demand for residential real estate remains quite weak at current prices. Sellers are actually pretty lucky to be getting the prices they want. That being said, even this may not be the case for much longer. Inventory continues to grow from 2022’s trough, reaching a multiyear high of 1.036 million as of May.

We’re also getting mixed messages on the sentiment front. Although neither of June’s final reading are plotted on the chart below, the Conference Board’s consumer confidence score fell from 98.0 to 93.0 this month, while the University of Michigan’s consumer sentiment reading for this month bounced from May’s low of 52.2 to 60.7. Both are still at or near very low levels, however.

Consumer Sentiment Charts

Source: Conference Board, University of Michigan, TradeStation

This is alarming on the surface, and perhaps investors should be worried. There’s an arguable contrariant interpretation of this sentiment data though. That is, all this doubt sets the stage for a turnaround that nobody sees coming.

Other numbers released last week that we’re not going to bother charting here are last month’s personal income and spending, and the second (of three) Q1 GDP estimates. Income as well as spending unexpectedly fell following April’s forward progress, giving the Federal Reserve a bunch more room to lower interest rates if need be. The revision to the first quarter’s GDP growth does the same. The Bureau of Economic Analysis says the country’s economic activity fell 0.5% in Q1, down from the first guess of a 0.2% dip, and much worse than the 0.2% growth economists were expecting in the revision.  

Everything else is on the grid.

Economic Data Report Calendar

Source: Briefing.com, TradeStation

This week isn’t going to be as busy. It’s also going to be shortened by the 4^th of July holiday on Friday. The only items of any real interest will be Tuesday’s look at the Institute of Supply Management’s measure of manufacturing activity, followed by Thursday’s report in the nation’s services activity. Economists are looking a slight improvement from each one. Both remain relatively lackluster though.

ISM Services, Manufacturing Index Charts

Source: Institute of Supply Management, TradeStation

Stock Market Index Analysis

Getting straight to the point, the bulls pushed up and off important technical support last week right out of the gate, and never looked back. It was enough to take stocks to record highs, in fact.

Take a look at the daily chart of the S&P 500 below. The technical floor in question is the 20-day moving average line (blue) at 6,015. It was under pressure as of the end of the previous week, leaving the market hanging by a thread. Then everything changed coming back from the weekend. The index made good persistent progress all week long, gaining 3.4% for the five-day stretch to push past its prior peak at 6,147, reached in February. Friday’s close at 6,173.07 is a new record for the S&P 500.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

And the effort is even healthier than it may seem on the surface. Look in the middle of the chart at the index’s daily volume. The bulls were puling in en masse with Friday’s rally, choosing to load-up headed into the weekend rather than defensively scaling out. This implies strong confidence that the market can and will continue rallying.

The NASDAQ Composite’s daily chart looks about the same, racing to a record high on Friday after bouncing off of its 20-day line it hit on Monday and the prior Friday. And like the S&P 500, there was strong volume behind Friday’s game-changing gain. The only additional detail worth noting here is that the composite also poked above the falling technical resistance line (orange, dashed) that had halted its advance a few times since December’s peak (red arrows).

NASDAQ Composite Daily Chart, with VXN

Source: TradeNavigator

Here’s the weekly chart of the S&P 500 to put last week’s advance in perspective. It was clearly a sizeable move, and there’s no denying the past twelve weeks have been incredibly — and even oddly — bullish. Even so, that’s only been an unwinding of an equally-rapid selloff in February and March. The big rally since mid-April doesn’t even yet put the market back in its long-term bullish channel (framed by dashed lines on the weekly chart below) that’s been established since 2023.

S&P 500 Weekly Chart, with VIX

Source: TradeNavigator

The NASDAQ Composite, by the way, has moved back into the middle of its equivalent rising bullish channel, demonstrating what’s possible, and what the S&P 500 may be ready to do for itself.

NASDAQ Composite Weekly Chart, with VXN

Source: TradeNavigator

That doesn’t mean the market is guaranteed to keep ripping higher straightaway from here. It can be — and likely will be — be tested at least a little bit from here. Just don’t panic if this bullishness falters just a little bit while the bulls catch their breath. There’s room for a little bit of a pullback without breaking the bigger-picture uptrend. As long as the S&P 500 remains above its convergence of several moving average lines around 5,810, the trend will technically be leaning in a bullish direction. Such a dip would actually be a buying opportunity, in fact, as long as the economic and geopolitical backdrop remain reasonably positive.

That doesn’t mean the bulls will only have smooth sailing in the immediate future. There’s still plenty of potential for stocks to get rattled, like lingering geopolitical tensions in the Middle East. But, the undertow is most definitely moving in a bullish direction.

We’ll explore the matter in some detail in a moment. Let’s first look at last week’s biggest economic announcements and then preview what’s coming this week.

Economic Data Analysis

Truth be told, while the market did well enough last week, it’s not as if the economy is so rock-solid that traders had no choice but to be buyers. There are still plenty of red flags waving.

Take the real estate market as an example. Although the Case-Shiller index extended its recently-rekindled uptrend in April (not May), the FHFA Home Price Index hastened its slow rollover from its peak in March.

Home Price Charts

Source: FHFA, Standard & Poor’s, TradeStation

This mixed message has at least a partial explanation. It’s possible that FHFA-eligible homebuyers aren’t using this loan program as much simply because prices are so high that many homes are no longer eligible for such loans. This of course would underscore the idea that there’s a firm dividing line between the higher-end and lower-end markets, with a fresh divergence between the two.

And other real estate data at least somewhat says things remain relatively weak. While sales of existing homes edged just a little higher in May after a couple of months’ worth of weakness, that was a just-barely move. Meanwhile, sales of new homes tumbled back to near the lowest levels seen since we finally started to ease out of the pandemic.

New, Existing Home Sales Charts

Source: National Assn. of Realtors, Census Bureau, TradeStation

Both of these data sets — alone or together — of course confirm that demand for residential real estate remains quite weak at current prices. Sellers are actually pretty lucky to be getting the prices they want. That being said, even this may not be the case for much longer. Inventory continues to grow from 2022’s trough, reaching a multiyear high of 1.036 million as of May.

We’re also getting mixed messages on the sentiment front. Although neither of June’s final reading are plotted on the chart below, the Conference Board’s consumer confidence score fell from 98.0 to 93.0 this month, while the University of Michigan’s consumer sentiment reading for this month bounced from May’s low of 52.2 to 60.7. Both are still at or near very low levels, however.

Consumer Sentiment Charts

Source: Conference Board, University of Michigan, TradeStation

This is alarming on the surface, and perhaps investors should be worried. There’s an arguable contrariant interpretation of this sentiment data though. That is, all this doubt sets the stage for a turnaround that nobody sees coming.

Other numbers released last week that we’re not going to bother charting here are last month’s personal income and spending, and the second (of three) Q1 GDP estimates. Income as well as spending unexpectedly fell following April’s forward progress, giving the Federal Reserve a bunch more room to lower interest rates if need be. The revision to the first quarter’s GDP growth does the same. The Bureau of Economic Analysis says the country’s economic activity fell 0.5% in Q1, down from the first guess of a 0.2% dip, and much worse than the 0.2% growth economists were expecting in the revision.  

Everything else is on the grid.

Economic Data Report Calendar

Source: Briefing.com, TradeStation

This week isn’t going to be as busy. It’s also going to be shortened by the 4^th of July holiday on Friday. The only items of any real interest will be Tuesday’s look at the Institute of Supply Management’s measure of manufacturing activity, followed by Thursday’s report in the nation’s services activity. Economists are looking a slight improvement from each one. Both remain relatively lackluster though.

ISM Services, Manufacturing Index Charts

Source: Institute of Supply Management, TradeStation

Stock Market Index Analysis

Getting straight to the point, the bulls pushed up and off important technical support last week right out of the gate, and never looked back. It was enough to take stocks to record highs, in fact.

Take a look at the daily chart of the S&P 500 below. The technical floor in question is the 20-day moving average line (blue) at 6,015. It was under pressure as of the end of the previous week, leaving the market hanging by a thread. Then everything changed coming back from the weekend. The index made good persistent progress all week long, gaining 3.4% for the five-day stretch to push past its prior peak at 6,147, reached in February. Friday’s close at 6,173.07 is a new record for the S&P 500.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

And the effort is even healthier than it may seem on the surface. Look in the middle of the chart at the index’s daily volume. The bulls were puling in en masse with Friday’s rally, choosing to load-up headed into the weekend rather than defensively scaling out. This implies strong confidence that the market can and will continue rallying.

The NASDAQ Composite’s daily chart looks about the same, racing to a record high on Friday after bouncing off of its 20-day line it hit on Monday and the prior Friday. And like the S&P 500, there was strong volume behind Friday’s game-changing gain. The only additional detail worth noting here is that the composite also poked above the falling technical resistance line (orange, dashed) that had halted its advance a few times since December’s peak (red arrows).

NASDAQ Composite Daily Chart, with VXN

Source: TradeNavigator

Here’s the weekly chart of the S&P 500 to put last week’s advance in perspective. It was clearly a sizeable move, and there’s no denying the past twelve weeks have been incredibly — and even oddly — bullish. Even so, that’s only been an unwinding of an equally-rapid selloff in February and March. The big rally since mid-April doesn’t even yet put the market back in its long-term bullish channel (framed by dashed lines on the weekly chart below) that’s been established since 2023.

S&P 500 Weekly Chart, with VIX

Source: TradeNavigator

The NASDAQ Composite, by the way, has moved back into the middle of its equivalent rising bullish channel, demonstrating what’s possible, and what the S&P 500 may be ready to do for itself.

NASDAQ Composite Weekly Chart, with VXN

Source: TradeNavigator

That doesn’t mean the market is guaranteed to keep ripping higher straightaway from here. It can be — and likely will be — be tested at least a little bit from here. Just don’t panic if this bullishness falters just a little bit while the bulls catch their breath. There’s room for a little bit of a pullback without breaking the bigger-picture uptrend. As long as the S&P 500 remains above its convergence of several moving average lines around 5,810, the trend will technically be leaning in a bullish direction. Such a dip would actually be a buying opportunity, in fact, as long as the economic and geopolitical backdrop remain reasonably positive.

They’re not past the point of no return just yet, mind you. There’s still a chance the bulls could turn things around. Given the circumstances, backdrop, and pent-up potential for profit-taking though, the bulls have a great deal to prove now if they want to keep things moving in their direction. There’s just one last line in the sand left to cross.

We’ll look at that line in a moment, but first, let’s recap last week’s biggest economic announcements and preview what’s coming this week.

Economic Data Analysis

Last week’s biggest news was of course the Fed’s decision on interest rates. As was widely expected, the Fed Funds Rate remain unchanged. The FOMC also offered the largely-expected rhetoric that leaves all options open until the next scheduled decision day in late July. The market’s betting the Federal Reserve won’t actually lower interest rates, however, until September (but those bets are pretty confident).

The party started in earnest, however, on Tuesday, with last month’s retail sales. Economists rightfully expected them to drop, but underestimated just how much they would.

Retail Sales Charts

Source: Census Bureau, TradeStation

One bad month doesn’t make a trend. All trends, however, start with that first bad month. We’ll need to see a couple more like May before we can get really worried.

Also on Tuesday we got last month’s capacity utilization and industrial production report from the Federal Reserve. It wasn’t great either, and not for the first time. Both remain in a slump that first took hold in March.

Capacity Utilization and Industrial Production Charts

Source: Federal Reserve, TradeStation

This is a problem. As we’ve noted before, the correlation between this data and corporate earnings and the long-term market is a strong one. To see weak production and capacity-utilization numbers now suggests the market is fighting a headwind it can’t push through.

On Wednesday we heard May’s housing starts and building permits, both of which slipped from April’s levels. In fact, starts reached a multi-month low, while permits made their lowest reading since bottoming in late-2022.

Housing Starts, Building Permits Charts

Source: Bureau of Labor Statistics, TradeStation

It’s getting difficult — if not impossible — to say economic malaise isn’t taking a toll on the housing market, which of course will take it’s on kind of toll on the economy.

Everything else is on the grid.

Economic Data Report Calendar

Source: Briefing.com, TradeStation

We’ll largely round out the real estate picture this week, with May’s sales of existing homes due on Monday, and new home sales coming on Wednesday. Forecasts are calling for a slight drop from both, which will extend the slow decline in sales of existing homes, and stymie the choppy recovery effort on the new-home front… but not by enough to kill it.

New, Existing Home Sales Rate Charts

Source: National Assn. of Realtors, Census Bureau, TradeStation

Just bear in mind that one of the only reasons new homes are selling as well as they are as they existing homes are selling so poorly. That said, also know that inventory of existing homes is slowly and quietly creeping higher, reaching a twelve-month high of 1.45 million units in April. We may finally be seeing the desperate and stubborn crowd coming out of the woodwork.

That idea will be fleshed out a little on Tuesday, by the way, when we hear the Case-Shiller report as well as the FHFA Home Price Index. This has been a bit frustrating simply because the latter has been showing weakness the former hasn’t for the past few months. Although we can generally presume that’s a hint that the higher-end market’s pricing is holding up better than the lower-end is, there’s no assurance this will remain the case in light of the loosening that seems to be taking shape now.

Home Price Charts

Source: FHFA, Standard & Poor’s, TradeStation

Just bear in mind that both home price reports will be fore April rather than May, and much changed in between those months. Don’t jump to any huge conclusions based on the home price data reports alone.

The consumer confidence snapshot will also help is figure out what’s really going on here. The Conference Board’s report is due on Tuesday, while the third and final look at June’s consumer sentiment score is coming on Friday. You may recall that both edged a little higher in May, but only after terrible Aprils. Economists expect another modest improvement for June.

Consumer Sentiment Charts

Source: Conference Board, University of Michigan, TradeStation

Finally, also on Friday we’ll hear about May’s personal income and personal spending changes. This is the data the Federal Reserve considers first and foremost when making decisions regarding interest rates. Be sure to keep your eyes and ears open for these numbers, particularly in light of all the current uncertainty.

Stock Market Index Analysis

In retrospect, we can see the market may have actually peaked two weeks ago. We saw a lower low and a lower high from the S&P 500 last week, and of course, logged a slightly lower close. The index is also putting some significant pressure on its 20-day moving average lines at 5,957 (plotted in blue on the daily chart of the S&P 500 below). The S&P 500 brushed it on Friday. Although it’s not under it, it didn’t exactly push up and off of it either.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

The NASDAQ Composite is doing the same thing, and for a far more specific reason. That is, two weeks ago it bumped into a falling technical resistance line (orange, dashed) that first materialized in December, and has now prevented the index from moving any higher on four separate occasions now (downward-pointing red arrows).

NASDAQ Composite Daily Chart, with VXN

Source: TradeNavigator

The weekly chart of the NASDAQ Composite puts this ceiling in a little bit more perspective, along with the last couple weeks’ worth of weakness. In both cases the index ended up closing near the low for the week (both of which were made on Fridays). This suggests traders are decreasingly committed and confident, opting to not take their long position into the weekend. Then again, after a 30% gain in just ten weeks, fears of a profit-taking pullback are certainly understandable.

NASDAQ Composite Weekly Chart, with VXN

Source: TradeNavigator

All that being said, don’t read too much into any pullback talk. The fact is, it’s entirely possible stocks will fall just a little — but not a lot — and rekindle the rally that materialized in April.

Go back up to the daily chart of the S&P 500 and notice how all the other moving average lines are close to converging at 5,780; the 20-day moving average is the outlier here. This narrow band should serve as a strong technical support level if-and-when tested even if the 20-day line does end up buckling as a floor. Indeed, a small setback here might actually be the best thing for the bulls in the long run, letting off much of the pressure of being so overbought at this time.

That being said, should the converged 20/100/200-day moving average lines fail to hold up as a floor and allow a more prolonged selloff to take hold, we’re also then going to be looking at the volatility index (or VIX) at the bottom of the S&P 500’s daily chart. It looks like it’s about to test a ceiling at 23.2, while another ceiling right above that one at 28.1 could also soon come into play. As long as at least one of those keeps the VIX contained, the bulls have a fighting chance. If the resistance at 28.1 (purple, dashed) is broken though, it will likely coincide with a breakdown from the S&P 500 itself, opening the selling floodgates.

For now, the best move to make is not making a move at all. Let’s let nature take its course and then respond, particularly in light of all the uncertainty surrounding tensions in the Middle East.

They’re not past the point of no return just yet, mind you. There’s still a chance the bulls could turn things around. Given the circumstances, backdrop, and pent-up potential for profit-taking though, the bulls have a great deal to prove now if they want to keep things moving in their direction. There’s just one last line in the sand left to cross.

We’ll look at that line in a moment, but first, let’s recap last week’s biggest economic announcements and preview what’s coming this week.

Economic Data Analysis

Last week’s biggest news was of course the Fed’s decision on interest rates. As was widely expected, the Fed Funds Rate remain unchanged. The FOMC also offered the largely-expected rhetoric that leaves all options open until the next scheduled decision day in late July. The market’s betting the Federal Reserve won’t actually lower interest rates, however, until September (but those bets are pretty confident).

The party started in earnest, however, on Tuesday, with last month’s retail sales. Economists rightfully expected them to drop, but underestimated just how much they would.

Retail Sales Charts

Source: Census Bureau, TradeStation

One bad month doesn’t make a trend. All trends, however, start with that first bad month. We’ll need to see a couple more like May before we can get really worried.

Also on Tuesday we got last month’s capacity utilization and industrial production report from the Federal Reserve. It wasn’t great either, and not for the first time. Both remain in a slump that first took hold in March.

Capacity Utilization and Industrial Production Charts

Source: Federal Reserve, TradeStation

This is a problem. As we’ve noted before, the correlation between this data and corporate earnings and the long-term market is a strong one. To see weak production and capacity-utilization numbers now suggests the market is fighting a headwind it can’t push through.

On Wednesday we heard May’s housing starts and building permits, both of which slipped from April’s levels. In fact, starts reached a multi-month low, while permits made their lowest reading since bottoming in late-2022.

Housing Starts, Building Permits Charts

Source: Bureau of Labor Statistics, TradeStation

It’s getting difficult — if not impossible — to say economic malaise isn’t taking a toll on the housing market, which of course will take it’s on kind of toll on the economy.

Everything else is on the grid.

Economic Data Report Calendar

Source: Briefing.com, TradeStation

We’ll largely round out the real estate picture this week, with May’s sales of existing homes due on Monday, and new home sales coming on Wednesday. Forecasts are calling for a slight drop from both, which will extend the slow decline in sales of existing homes, and stymie the choppy recovery effort on the new-home front… but not by enough to kill it.

New, Existing Home Sales Rate Charts

Source: National Assn. of Realtors, Census Bureau, TradeStation

Just bear in mind that one of the only reasons new homes are selling as well as they are as they existing homes are selling so poorly. That said, also know that inventory of existing homes is slowly and quietly creeping higher, reaching a twelve-month high of 1.45 million units in April. We may finally be seeing the desperate and stubborn crowd coming out of the woodwork.

That idea will be fleshed out a little on Tuesday, by the way, when we hear the Case-Shiller report as well as the FHFA Home Price Index. This has been a bit frustrating simply because the latter has been showing weakness the former hasn’t for the past few months. Although we can generally presume that’s a hint that the higher-end market’s pricing is holding up better than the lower-end is, there’s no assurance this will remain the case in light of the loosening that seems to be taking shape now.

Home Price Charts

Source: FHFA, Standard & Poor’s, TradeStation

Just bear in mind that both home price reports will be fore April rather than May, and much changed in between those months. Don’t jump to any huge conclusions based on the home price data reports alone.

The consumer confidence snapshot will also help is figure out what’s really going on here. The Conference Board’s report is due on Tuesday, while the third and final look at June’s consumer sentiment score is coming on Friday. You may recall that both edged a little higher in May, but only after terrible Aprils. Economists expect another modest improvement for June.

Consumer Sentiment Charts

Source: Conference Board, University of Michigan, TradeStation

Finally, also on Friday we’ll hear about May’s personal income and personal spending changes. This is the data the Federal Reserve considers first and foremost when making decisions regarding interest rates. Be sure to keep your eyes and ears open for these numbers, particularly in light of all the current uncertainty.

Stock Market Index Analysis

In retrospect, we can see the market may have actually peaked two weeks ago. We saw a lower low and a lower high from the S&P 500 last week, and of course, logged a slightly lower close. The index is also putting some significant pressure on its 20-day moving average lines at 5,957 (plotted in blue on the daily chart of the S&P 500 below). The S&P 500 brushed it on Friday. Although it’s not under it, it didn’t exactly push up and off of it either.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

The NASDAQ Composite is doing the same thing, and for a far more specific reason. That is, two weeks ago it bumped into a falling technical resistance line (orange, dashed) that first materialized in December, and has now prevented the index from moving any higher on four separate occasions now (downward-pointing red arrows).

NASDAQ Composite Daily Chart, with VXN

Source: TradeNavigator

The weekly chart of the NASDAQ Composite puts this ceiling in a little bit more perspective, along with the last couple weeks’ worth of weakness. In both cases the index ended up closing near the low for the week (both of which were made on Fridays). This suggests traders are decreasingly committed and confident, opting to not take their long position into the weekend. Then again, after a 30% gain in just ten weeks, fears of a profit-taking pullback are certainly understandable.

NASDAQ Composite Weekly Chart, with VXN

Source: TradeNavigator

All that being said, don’t read too much into any pullback talk. The fact is, it’s entirely possible stocks will fall just a little — but not a lot — and rekindle the rally that materialized in April.

Go back up to the daily chart of the S&P 500 and notice how all the other moving average lines are close to converging at 5,780; the 20-day moving average is the outlier here. This narrow band should serve as a strong technical support level if-and-when tested even if the 20-day line does end up buckling as a floor. Indeed, a small setback here might actually be the best thing for the bulls in the long run, letting off much of the pressure of being so overbought at this time.

That being said, should the converged 20/100/200-day moving average lines fail to hold up as a floor and allow a more prolonged selloff to take hold, we’re also then going to be looking at the volatility index (or VIX) at the bottom of the S&P 500’s daily chart. It looks like it’s about to test a ceiling at 23.2, while another ceiling right above that one at 28.1 could also soon come into play. As long as at least one of those keeps the VIX contained, the bulls have a fighting chance. If the resistance at 28.1 (purple, dashed) is broken though, it will likely coincide with a breakdown from the S&P 500 itself, opening the selling floodgates.

For now, the best move to make is not making a move at all. Let’s let nature take its course and then respond, particularly in light of all the uncertainty surrounding tensions in the Middle East.

And yet, there’s a still a chance that the selling can be halted before taking on a self-fueling life of its own.

We’ll show what that chance consists of in a moment below. Let’s first review last week’s biggest economic news and preview the reports that are in the lineup for this week.

Economic Data Analysis

There was really only one data set of any real interest reported last week. That’s May’s inflation. It remains muted. Although non-core consumer inflation edged just a but higher to an annualized rate of 2.4%, that’s still low enough to satisfy the Federal Reserve. In the meantime, producer inflation continues to fall rather decisively. There’s certainly room for the FOMC to lower interest rates, which the market is betting it will do in September.

Consumer, Producer Inflation Rate Charts

Source: Bureau of Labor Statistics, TradeStation

You may have also heard Friday’s buzz that consumer sentiment improved for the first time this year. Just take that report with at least a small grain of salt. That’s in reference to the University of Michigan’s monthly sentiment score, which is revised twice before the end of the month. Even if it doesn’t change though, it’s still rather low. One better month doesn’t exactly make a trend. (It’s still slightly encouraging though, in that things are getting worse.) We’ll take a more in-depth look at it later in the month.

Everything else is on the grid.

Economic Data Report Calendar

Source: Briefing.com, TradeStation

The coming week’s going to be a big one (in terms of economic news), with the highlight being Wednesday’s decision on interest rates. As was noted, the market’s currently betting the FOMC won’t change the Fed Funds target rate. There’s plenty of other data due that could impact stocks though.

One of those data sets is Tuesday’s look at May’s retail sales. They ticked a little higher again in April, but economists believe this spending measurably fell in May. Just know that the National Retail Federation’s numbers for May have already been posted, and it reported growth. We could be due for a pleasant surprise.

Retail Sales Charts

Source: Census Bureau, TradeStation

Also on Tuesday we’ll hear May’s industrial production and capacity utilization. April’s figures were mostly even with March’s, and forecasters expect more of the same this time around.

Industrial Productivity and Capacity Utilization Charts

Source: Federal Reserve, TradeStation

This isn’t insignificant data. There’s a strong correlation between corporate earnings, the market itself, and this capacity utilization and production data. Being directionless for a while now, however, there’s not much helpful data to be gleaned here at this time.

Finally, on Wednesday look for May’s housing starts and building permits. They’ve been drifting lower (albeit erratically) since peaking in early-2022. While both will likely tick a little higher this time around, neither is likely to moved meaningfully higher this time around.

Housing Starts, Building Permits Charts

Source: Bureau of Labor Statistics, TradeStation

Yes, this piece of the economy needs a jolt. Lower home prices would help even more than lower interest rates.

Stock Market Index Analysis

The bulk of last week’s stumble is the result of Friday’s drama in the Middle East. And, understandably so. It wasn’t a horrific day, but it was reason for pause. Fortunately the selling didn’t take too big of a bite out of the market.

On the flipside, there’s still certainly ample opportunity for the bears to do more damage…particularly if tensions in the Middle East continue to escalate (which it looks like they will).

The good news is, the next big line in the sand is pretty clear. That’s the 20-day moving average lines. For the S&P 500 on the daily chart below, that’s currently at 5,944, plotted in blue. The pullback almost tested this technical floor on Friday, but seemed to sense it wouldn’t simply be able to break under it. It ended the week on the fence, so to speak. But, it also ended the week on the defensive, and certainly ripe for some profit-taking.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

This weekly chart of the S&P 500 is a reminder of just how big the rally from April’s low has been (not to mention the February-April pullback), and why there’s so much risk of profit-taking now. The bears will just have to break down a thick layer of support between 5,668 and 5,944.

S&P 500 Weekly Chart, with VIX

Source: TradeNavigator

The weekly chart of the S&P 500 also shows us something else worth watching. That’s the volatility index, or VIX. It’s not starting to test a technical ceiling right around 23 (red, dashed). It’s not punched through it yet, and may not do so. It’s another “trigger” level to watch though.

The weekly chart of the NASDAQ Composite looks similar, but with one noteworthy difference. That is, it peaked on Friday when it bumped into an established technical ceiling that connects the weekly highs near the end of last year and early this year (orange, dashed). There may be a mental line in the sand that that traders don’t even recognize is in the way. Just remember that – like the S&P 500 — there’s plenty of technical support immediately below. It would take a bit of persistent “umph” from the bears to tip stocks over.

NASDAQ Composite Daily Chart, with VXN

Source: TradeNavigator

It wouldn’t exactly take a heroic effort, however.

Last week we took a look at the NYSE’s up and down volume, and the number of stocks that were above and below their 200-day moving average line. They were, on balance, still leaning in a bearish direction. We’re offering a similarly but slightly different image this week, comparing the S&P 500 to the NYSE’s advancers and decliners (ADV and DECL, respectively), and the NYSE’s up volume (UVOL) and down volume (DVOL). The daily data is too erratic to interpret. By plotting moving averages for each of these four data sets, however, we can get a good feel for the underlying trend. As you can see, the up-volume and advancer trends are in decline, while the down-volume and decliner trends are rising.

S&P 500 vs. NYSE Advancers/Decliners and Up/Down Volume

Source: TradeNavigator

It’s not a rock-solid sign of inevitable disaster. Breadth and depth naturally turn bearish when the market falls. But, these underlying trends are a little better developed than the market’s budding pullback. The undertow has actually been net-bearish for some time to get the chart above into its current state.

That doesn’t have to mean something. It can mean something though. With the market being as vulnerable to a correction as it is here, it would be naïve to ignore this dynamic.

And yet, there’s a still a chance that the selling can be halted before taking on a self-fueling life of its own.

We’ll show what that chance consists of in a moment below. Let’s first review last week’s biggest economic news and preview the reports that are in the lineup for this week.

Economic Data Analysis

There was really only one data set of any real interest reported last week. That’s May’s inflation. It remains muted. Although non-core consumer inflation edged just a but higher to an annualized rate of 2.4%, that’s still low enough to satisfy the Federal Reserve. In the meantime, producer inflation continues to fall rather decisively. There’s certainly room for the FOMC to lower interest rates, which the market is betting it will do in September.

Consumer, Producer Inflation Rate Charts

Source: Bureau of Labor Statistics, TradeStation

You may have also heard Friday’s buzz that consumer sentiment improved for the first time this year. Just take that report with at least a small grain of salt. That’s in reference to the University of Michigan’s monthly sentiment score, which is revised twice before the end of the month. Even if it doesn’t change though, it’s still rather low. One better month doesn’t exactly make a trend. (It’s still slightly encouraging though, in that things are getting worse.) We’ll take a more in-depth look at it later in the month.

Everything else is on the grid.

Economic Data Report Calendar

Source: Briefing.com, TradeStation

The coming week’s going to be a big one (in terms of economic news), with the highlight being Wednesday’s decision on interest rates. As was noted, the market’s currently betting the FOMC won’t change the Fed Funds target rate. There’s plenty of other data due that could impact stocks though.

One of those data sets is Tuesday’s look at May’s retail sales. They ticked a little higher again in April, but economists believe this spending measurably fell in May. Just know that the National Retail Federation’s numbers for May have already been posted, and it reported growth. We could be due for a pleasant surprise.

Retail Sales Charts

Source: Census Bureau, TradeStation

Also on Tuesday we’ll hear May’s industrial production and capacity utilization. April’s figures were mostly even with March’s, and forecasters expect more of the same this time around.

Industrial Productivity and Capacity Utilization Charts

Source: Federal Reserve, TradeStation

This isn’t insignificant data. There’s a strong correlation between corporate earnings, the market itself, and this capacity utilization and production data. Being directionless for a while now, however, there’s not much helpful data to be gleaned here at this time.

Finally, on Wednesday look for May’s housing starts and building permits. They’ve been drifting lower (albeit erratically) since peaking in early-2022. While both will likely tick a little higher this time around, neither is likely to moved meaningfully higher this time around.

Housing Starts, Building Permits Charts

Source: Bureau of Labor Statistics, TradeStation

Yes, this piece of the economy needs a jolt. Lower home prices would help even more than lower interest rates.

Stock Market Index Analysis

The bulk of last week’s stumble is the result of Friday’s drama in the Middle East. And, understandably so. It wasn’t a horrific day, but it was reason for pause. Fortunately the selling didn’t take too big of a bite out of the market.

On the flipside, there’s still certainly ample opportunity for the bears to do more damage…particularly if tensions in the Middle East continue to escalate (which it looks like they will).

The good news is, the next big line in the sand is pretty clear. That’s the 20-day moving average lines. For the S&P 500 on the daily chart below, that’s currently at 5,944, plotted in blue. The pullback almost tested this technical floor on Friday, but seemed to sense it wouldn’t simply be able to break under it. It ended the week on the fence, so to speak. But, it also ended the week on the defensive, and certainly ripe for some profit-taking.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

This weekly chart of the S&P 500 is a reminder of just how big the rally from April’s low has been (not to mention the February-April pullback), and why there’s so much risk of profit-taking now. The bears will just have to break down a thick layer of support between 5,668 and 5,944.

S&P 500 Weekly Chart, with VIX

Source: TradeNavigator

The weekly chart of the S&P 500 also shows us something else worth watching. That’s the volatility index, or VIX. It’s not starting to test a technical ceiling right around 23 (red, dashed). It’s not punched through it yet, and may not do so. It’s another “trigger” level to watch though.

The weekly chart of the NASDAQ Composite looks similar, but with one noteworthy difference. That is, it peaked on Friday when it bumped into an established technical ceiling that connects the weekly highs near the end of last year and early this year (orange, dashed). There may be a mental line in the sand that that traders don’t even recognize is in the way. Just remember that – like the S&P 500 — there’s plenty of technical support immediately below. It would take a bit of persistent “umph” from the bears to tip stocks over.

NASDAQ Composite Daily Chart, with VXN

Source: TradeNavigator

It wouldn’t exactly take a heroic effort, however.

Last week we took a look at the NYSE’s up and down volume, and the number of stocks that were above and below their 200-day moving average line. They were, on balance, still leaning in a bearish direction. We’re offering a similarly but slightly different image this week, comparing the S&P 500 to the NYSE’s advancers and decliners (ADV and DECL, respectively), and the NYSE’s up volume (UVOL) and down volume (DVOL). The daily data is too erratic to interpret. By plotting moving averages for each of these four data sets, however, we can get a good feel for the underlying trend. As you can see, the up-volume and advancer trends are in decline, while the down-volume and decliner trends are rising.

S&P 500 vs. NYSE Advancers/Decliners and Up/Down Volume

Source: TradeNavigator

It’s not a rock-solid sign of inevitable disaster. Breadth and depth naturally turn bearish when the market falls. But, these underlying trends are a little better developed than the market’s budding pullback. The undertow has actually been net-bearish for some time to get the chart above into its current state.

That doesn’t have to mean something. It can mean something though. With the market being as vulnerable to a correction as it is here, it would be naïve to ignore this dynamic.

And yet, there’s good reason to remain prepared for the worst even as we hope for the best. The volume behind last week’s advance was very, very thin, and there’s some pretty serious technical resistance for both of the key indexes we watch immediately above current levels. The bulls may hit a well yet.

We’ll take a detailed look at those resistance levels in a moment. Let’s first run through last week’s more important economic news and preview what’s in the lineup for this week.

Economic Data Analysis

Not a lot of important news from last week, but the important stuff we got was really, really important. And not necessarily bullish.

Take last month’s economic barometers from the Institute of Supply Management as an example. The ISM Manufacturing Index fell a bit further below the pivotal 50 mark, while the ISM Services Index took a surprise tumble under the 50 level, falling to 49.9 rather than rising from 51.6 to 52.2 in May. It’s impossible to deny that both data sets are now in clear downtrends, which of course bodes poorly for the overall economy.

ISM Services, Manufacturing Charts

Source: Institute of Supply Management, TradeStation

The only other truly noteworthy numbers posted last week is Friday’s jobs report, also for May. Although payroll growth fell from April’s downward-adjusted pace of 147,000, the 139,000 new jobs reported was close to the prior month’s count, and higher than the expected 125,000. Perhaps more important, that was enough payroll growth to leave the unemployment rate at a reasonably healthy 4.2%.  

Unemployment Rate, Payroll Growth Charts

Source: Bureau of Labor Statistics, TradeStation

You have heard that the JOLTS (Job Openings/Labor Turnover Survey) indicated a swell of new openings in April, hinting at economic growth. Just don’t read too much into that take. We’re seeing a trend of posted available jobs that rarely lead to an actual hiring. Meanwhile, ADP’s employment growth figure fell from April’s 60,000 to 37,000 last month rather than rising to the projected 110,000 jobs. The labor market’s report card is still mostly up in the air.

Everything else is on the grid.

Economic Data Report Calendar

Source: Briefing.com, TradeStation

This week’s pretty light, but once again, the little bit of important stuff we’re getting is very, very important. On Wednesday look for last month’s consumer inflation report, followed by producer inflation figures on Thursday. Consumer inflation has been cooling since 2022. Producer inflation finally followed suit beginning early this year. Economists now think things are going to start leveling at these current (and palatable) levels.

Consumer, Producer Inflation Rate Charts

Source: Bureau of Labor Statistics, TradeStation

This isn’t the only data the Federal Reserve considers when making interest rate decisions, by the way. It’s not even the primary data it considers. That honor belongs to personal income and consumer spending.

Nevertheless, to the extent this coming week’s report does matter, there’s room for the FOMC to cut rates sooner than later. The market’s still betting it won’t happen until September though.

Stock Market Index Analysis

Building on the previous week’s slight recovery effort, stocks made forward progress again last week. All told, the S&P 500 advanced 1.5% last week, barely making a new multiweek high in the process.

Still, progress is progress. The fact that the index put some more distance between itself and all of its key moving average line (which recently made bullish crossovers… as circled on the daily chart below). The path of least resistance is higher.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

There are modest concerns, however. One of them is the fact that there was only light volume behind the move, just as there’s been modest volume the whole way up from April’s bounceback from the steep marketwide selloff. Ideally, you’d see at least average — and growing — volume behind a rally that’s built to last.

It’s certainly possible the lack of volume could simply reflect the usual disinterest in trading that we often see this time of year. That’s what the middle portion of the chart below (comparing the S&P 500’s recent daily action to the NYSE’s “up” volume and “down” volume trends say anyway. While up volume is waning, down volume is as well. Nevertheless, you need volume to keep moves going.

S&P 500 vs. % Above/Below 200-Day Moving Average and NYSE Up/Down Volume

Source: TradeNavigator

On the bottom portion of the chart above there’s another hint that this current bullish effort isn’t exactly well-supported. Although the S&P 500 is currently above its pivotal 200-day moving average line (green) at 5,796, most of the stocks in the S&P 500 aren’t. Only 37.2% of the index’s constituents are above that mark, once again calling into question just how much gas is in the current rally’s tank.

Perhaps the bigger concern at this time, however, is what lies just a little farther out. That’s a technical ceiling around 6,131, where the S&P 500 peaked in February. In a similar vein, the S&P 500’s Volatility Index (VIX) at the bottom of the chart is about to drift into something of an absolute technical floor around 12.6. While simply touching this support doesn’t have to mean the market rolls over, it’s certainly more difficult for stocks to continue making gains when the VIX is this low.

And it’s no coincidence that the S&P 500 is approaching its big technical ceiling right around the same time the VIX is nearing a floor.

Here’s the daily chart of the NASDAQ Composite, which looks about the same, with the same analytical response. That is, the VXN is nearing a major support level while the Composite itself is approaching an important technical ceiling. And like the S&P 500, there’s a distinct lack of volume — even waning volume — with the current advance.

NASDAQ Composite Daily Chart, with VXN and Volume

Source: TradeNavigator

We have to side with the direction of the market’s current momentum. So, yes, we’re bullish here. This is a wobbly (at best) bullish effort though that’s about to be tested in a pretty big way. This certainly isn’t a time to be blindly plowing into a bunch of new long trades.

And yet, there’s good reason to remain prepared for the worst even as we hope for the best. The volume behind last week’s advance was very, very thin, and there’s some pretty serious technical resistance for both of the key indexes we watch immediately above current levels. The bulls may hit a well yet.

We’ll take a detailed look at those resistance levels in a moment. Let’s first run through last week’s more important economic news and preview what’s in the lineup for this week.

Economic Data Analysis

Not a lot of important news from last week, but the important stuff we got was really, really important. And not necessarily bullish.

Take last month’s economic barometers from the Institute of Supply Management as an example. The ISM Manufacturing Index fell a bit further below the pivotal 50 mark, while the ISM Services Index took a surprise tumble under the 50 level, falling to 49.9 rather than rising from 51.6 to 52.2 in May. It’s impossible to deny that both data sets are now in clear downtrends, which of course bodes poorly for the overall economy.

ISM Services, Manufacturing Charts

Source: Institute of Supply Management, TradeStation

The only other truly noteworthy numbers posted last week is Friday’s jobs report, also for May. Although payroll growth fell from April’s downward-adjusted pace of 147,000, the 139,000 new jobs reported was close to the prior month’s count, and higher than the expected 125,000. Perhaps more important, that was enough payroll growth to leave the unemployment rate at a reasonably healthy 4.2%.  

Unemployment Rate, Payroll Growth Charts

Source: Bureau of Labor Statistics, TradeStation

You have heard that the JOLTS (Job Openings/Labor Turnover Survey) indicated a swell of new openings in April, hinting at economic growth. Just don’t read too much into that take. We’re seeing a trend of posted available jobs that rarely lead to an actual hiring. Meanwhile, ADP’s employment growth figure fell from April’s 60,000 to 37,000 last month rather than rising to the projected 110,000 jobs. The labor market’s report card is still mostly up in the air.

Everything else is on the grid.

Economic Data Report Calendar

Source: Briefing.com, TradeStation

This week’s pretty light, but once again, the little bit of important stuff we’re getting is very, very important. On Wednesday look for last month’s consumer inflation report, followed by producer inflation figures on Thursday. Consumer inflation has been cooling since 2022. Producer inflation finally followed suit beginning early this year. Economists now think things are going to start leveling at these current (and palatable) levels.

Consumer, Producer Inflation Rate Charts

Source: Bureau of Labor Statistics, TradeStation

This isn’t the only data the Federal Reserve considers when making interest rate decisions, by the way. It’s not even the primary data it considers. That honor belongs to personal income and consumer spending.

Nevertheless, to the extent this coming week’s report does matter, there’s room for the FOMC to cut rates sooner than later. The market’s still betting it won’t happen until September though.

Stock Market Index Analysis

Building on the previous week’s slight recovery effort, stocks made forward progress again last week. All told, the S&P 500 advanced 1.5% last week, barely making a new multiweek high in the process.

Still, progress is progress. The fact that the index put some more distance between itself and all of its key moving average line (which recently made bullish crossovers… as circled on the daily chart below). The path of least resistance is higher.

S&P 500 Daily Chart, with VIX and Volume

Source: TradeNavigator

There are modest concerns, however. One of them is the fact that there was only light volume behind the move, just as there’s been modest volume the whole way up from April’s bounceback from the steep marketwide selloff. Ideally, you’d see at least average — and growing — volume behind a rally that’s built to last.

It’s certainly possible the lack of volume could simply reflect the usual disinterest in trading that we often see this time of year. That’s what the middle portion of the chart below (comparing the S&P 500’s recent daily action to the NYSE’s “up” volume and “down” volume trends say anyway. While up volume is waning, down volume is as well. Nevertheless, you need volume to keep moves going.

S&P 500 vs. % Above/Below 200-Day Moving Average and NYSE Up/Down Volume

Source: TradeNavigator

On the bottom portion of the chart above there’s another hint that this current bullish effort isn’t exactly well-supported. Although the S&P 500 is currently above its pivotal 200-day moving average line (green) at 5,796, most of the stocks in the S&P 500 aren’t. Only 37.2% of the index’s constituents are above that mark, once again calling into question just how much gas is in the current rally’s tank.

Perhaps the bigger concern at this time, however, is what lies just a little farther out. That’s a technical ceiling around 6,131, where the S&P 500 peaked in February. In a similar vein, the S&P 500’s Volatility Index (VIX) at the bottom of the chart is about to drift into something of an absolute technical floor around 12.6. While simply touching this support doesn’t have to mean the market rolls over, it’s certainly more difficult for stocks to continue making gains when the VIX is this low.

And it’s no coincidence that the S&P 500 is approaching its big technical ceiling right around the same time the VIX is nearing a floor.

Here’s the daily chart of the NASDAQ Composite, which looks about the same, with the same analytical response. That is, the VXN is nearing a major support level while the Composite itself is approaching an important technical ceiling. And like the S&P 500, there’s a distinct lack of volume — even waning volume — with the current advance.

NASDAQ Composite Daily Chart, with VXN and Volume

Source: TradeNavigator

We have to side with the direction of the market’s current momentum. So, yes, we’re bullish here. This is a wobbly (at best) bullish effort though that’s about to be tested in a pretty big way. This certainly isn’t a time to be blindly plowing into a bunch of new long trades.