The S&P500 added almost 0.5% last week. Volume was very light, so the price movement cannot be explained by a large inflow of new investor capital. And volatility crept higher, so even though the large cap index closed higher on the week, many investors became more nervous.
In US macro news, last week’s results were slightly stronger than usual. On the downside, consumer confidence, wholesale inventories, pending home sales and the PMI manufacturing index all disappointed. But more results exceeded expectations—the Case-Shiller home price index, the Dallas Fed manufacturing survey, international trade in goods, initial jobless claims, Chicago PMI, ISM manufacturing, and the May payrolls report all beat their respective consensus estimates. That said, one week’s worth of better-than-expected results does not make for an economic turnaround story; until and unless these types of results continue for several months (never mind weeks) in a row, then the story of continual sluggish growth in the US has not changed.
Last week’s gain the in the S&P500 was fully anticipated by the prior upturn in the daily technical indicators for this index. And with another week of gains in the books, the bullish pattern on the daily charts has become even more reinforced.
On the weekly charts, the technical damage suffered over the last 4+ months has not quite been reversed. But it wouldn’t take many more even moderate weekly gains to accomplish this reversal.
Also, our simple rule is still bullish. This super long-term indicator has never turned bearish this year, despite all the damage incurred on the weekly and daily charts starting in February.
So for the next week or two, most technical signals are pointing to the strong possibility of more modest gains in the S&P500.