On April 23, we discussed the technical divergences that were apparent on the daily chart from the perspective of breadth and volume. On April 24, we also mentioned divergences that were forming on the weekly chart from a momentum perspective. The measures did not signal the end of the upward movment, but they did act as confirmation of my belief that we are in the midst of a final wave up of a longer-term price structure.
Those divergences we discussed at the end of April still exist. In addition to those signs of technical weakness, we can now see similar momentum divergences beginning to appear on the daily chart of the S&P 500. This means that even as the market continues to rally higher, the breadth, volume, and momentum of this upward movement continues to deteriorate.
This can be a frustrating time for some traders. There is plenty of technical support for the argument that we are nearing a significant price high for the market. We simply have not reached it yet. We continue to make higher highs and higher lows within a well-defined trend channel. We are just below important resistance levels for the S&P 500 at the 1515 and 1520 levels. We also have incomplete wave formations. It can be difficult to maintain the patience necessary to ride this formation up to its top.
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