After surging 6% year-to-date through the close on February 1st, SPDR S&P 500 (SPY) has stalled out this week, just shy of projected monthly resistance (red dashed line in chart below). The loss of momentum is nearly confirmed by stochastics, is confirmed by MACD and relative strength is fading.

Click image to view full size…

In addition, Investor’s Intelligence latest sentiment survey reported bulls at 54.7% and bears at just 21.1%. The spread between the two is now higher than it was near the two market tops of 2012. The high bullish percentage and the spread suggest there may not be as much money left on the sidelines as some would believe. Granted the Fed is providing new cash at an $85 billion per month rate, but the recipients may not consider it all to be investment capital. With the present technical outlook stretched, just a few remaining bears left to convert to bulls and seasonally weak February underway, conditions appear ripe for some kind of moderate pullback or at the very least a period of consolidation.

 

Contributed by Christopher Mistal, Stock Trader’s Almanac

 

 

 

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