We’re seeing some much needed consolidation after the big run from 1400 on SPX. The move was almost straight up causing price to move above the top of its Bollinger band. A few days to a week of sideways to down action will be very healthy for the market. We’d like to see price get inside the Bollinger band, then crawl along the top side of it as the next phase of this run. As you can see from the chart, hitting the top of the band is not a problem in a strong market as price can move for a long time along the top. We’ll be watching for the bands to narrow because that’s when direction changes occur.
On a side note, our Twitter Sentiment indicator is still providing readings above or barely below zero on a daily basis. This is keeping our smoothed sentiment indicator above zero even as the market is consolidating. So far the action looks like a much needed rest. It doesn’t look like a lot of sellers have entered the market. Instead, buyers are waiting for lower prices before they commit more money.