Last week was interesting. We began closing the gap that formed coming into the June low. Only to end the week back against the June low; previously, I said a close that filled the gap would signal a bullish or sideways course for the market. It appears that the 21 EMA held that back. It is common to find support/resistance at moving averages that correlate to fundamentals or cycles. In this case, the 21 EMA represents the average number of monthly trading days.
Looking at the top three performing sectors of the SPX, we saw bearish signals closing out last week. XLE, the top-performing sector, had a strong bullish move but ended with a candle that warns of reversal. XLU and XLV reversed progress earlier in the week and resumed their downtrend. A quick flip through the other sectors shows much of the same story.
This week, I don’t feel strongly about the market going in either direction. In my opinion, it is holding in an indecisive range. Due to the uncertain nature of the market, for my trading, I am now looking for two consecutive closes beyond either line. Two is more or less an arbitrary number that I am using as a filter. I also feel hesitation due to the extremes we see in the MACD of the SPX and some sectors. Its current display could confirm either a bullish or bearish movement. When it sits in this position, we have one less tool to try to guess the future.