I am the first to tell you that there are smarter technicians out there than myself. Which is why I make sure every time one of them is in the press I check in to find out their opinion on the market. Below are the thoughts of Mary Ann Bartels, the head of U.S. technical analysis for Bank of America/Merrill Lynch.
From the WSJ:
Just when the market was on the precipice of breaking key support on the S&P 500, ECB president Mario Draghi comes to the rescue with the promise to do whatever it takes to preserve the euro. Global equity markets responded positively. The S&P 500 reversed sharply on expanding volume to break above the previous high of 1380 to continue to rally to test resistance at 1400-1425 and the May 2008 high is near 1440. Key support is 1325, which held last week.
All is not rosy with the technicals on this breakout.
We have been making the case that the recent rally was more short covering than new demand (buyers). The technical indicators confirm this with negative divergences in price momentum and market breadth. If these indicators do not shift more positively, a potential correction into September is still on the table.
I tend to agree with Marry Ann. From what I’m seeing, momentum has not been participating in the rally’s the major markets have been experiencing, setting lower highs with each new high in the market.Disclosure page for full disclaimer. Connect with Andrew on Google+.