S&P 500 Index Forecast: Bullish Trend Holds as Bullish Percent Index Weakens

NAHB Housing Index Beats Forecast But Stays Weak

There’s a small surprise on this red day with the NAHB HOusing Market Index coming in at 37, better than the 34 forecast and above the prior 35. But it’s still below 50 so builders overall are seeing conditions as poor rather than good. This Index has been stuck in the mid-high 30s for months so there’s alot more room to go here.

NAHB Housing Market Index Rises to 37 in May, Beating the 34 Forecast But Remaining Well Below the 50 Expansion Line

S&P 500 Weekly Chart Stalls Near 1.618 Extension

That long upper wick on the S&P 500 weekly chart isn’t enticing me to go long. Worse yet, it was near the 1.618 Fibonacci extension. So the bulls hit their target it seems. And now they might be going for a rest. We will need to see how the Index behaves around 7,240 support. If it closes below there my view on trend will turn to neutral.

S&P 500 Weekly Chart Shows Price Pausing Near the 1.618 Fibonacci Extension as Supertrend Support Rises Beneath the Rally

S&P 500 Daily Chart Holds ABove 21-EMA as Momentum Cools

The Index is still above its 21-day EMA but the price is getting closer and closer to it. This will mark the first test since it crossed over the EMA in early April. The RSI crossed under the overbought level and is heading lower, which is another sign that the Index will continue to pull back. We need to see how it behaves around the 21-EMA.

S&P 500 Daily Chart Shows The Index Easing From Recent Highs While Staying Above the Rising 21-EMA

S&P 500 Breadth Breaks Below 50 as Rally Loses Participation

This isn’t a good sign. Not good at all. A BPSPX cross below 50 has been followed by a negative S&P 500 return 43.27% of the time over the 10-15 day window, with median losses of -3.21% to -3.59%. Moreover, when weakness persists, the median downside has been deeper over longer horizons, including -9.10% over 6 months, -11.49% over 9 months, and -14.01% over a year.

So we need to be wary here.

S&P 500 Bullish Percent Index Slips to 46.8, Signaling Weaker Market Breadth Even As Major Indices Remain Near Recent Highs

S&P 500 Renko Pullback Tests Medium Term Support

After such a strong rally and making all time highs the S&P 500 Index is now having a bit of a pullback as it seems the bulls are a bit exhausted. So consolidation is needed for the Index. The Supertrend has flipped to negative and the 50-SMA is now acting as support for the Index. The RSI is trending lower and is testing its 50 level while the Z-Score SMA is also trend lower but not yet exhausted either. We’ll need to see how the S&P 500 Index behaves around its 50-SMA.

S&P 500 20-Brick Renko Shows A Cooling Rally As Price Slips Below Supertrend Resistance But Remains Above the 50-SMA

The Verdict

Current Trend Direction: Bullish

Bias: Positive

Support Levels: 7,240, 6,775

Resistance Levels: 7,450, 8,150

Medium Term Path: I am cautiously optimistic here as there’s deterioration in medium term market breadth. The structure across the multiple timeframes hasn’t collapsed outright and the VIX is still below 20 so that still tells me that this may just be a slight pullback rather than a huge correction or even a bear market. The signs aren’t there. As yet.