The popular averages closed well to the upside again on Wednesday. The US trade in goods deficit widened by less than expected in April. Meanwhile, on Wednesday the price of crude oil continued its climb while that for gold fell.
Above is my 3-month chart of the S&P 500 exchange traded fund (SPY). The SPY had been undergoing a long-term rolling correction for over a year. Then the extreme bearish sentiment expressed by media pundits and investment advisers during the early weeks of this year may have resulted in many retail investors unloading stock positions or selling short at ridiculously cheap prices and setting up bargains for those unafraid to take advantage. Their actions may have caused the formation of a beautiful W-shaped double bottom that was completed on February 11.
The SPY met some resistance at its 50-day moving average, then punched solidly above on March 1. There was continuation until the pullback on March 8 followed by a resumption of the rise. The push above the 200-day MA on March 11 provided encouragement. The hesitation seen following that was normal, and the bounce up from that MA was welcome. April had a couple of flat periods with internal vibrations. The bounce on May 6 from the 50-day MA was encouraging, but the fall back under on May 13 renewed concern. However the nice hop back above that moving average on Tuesday and strong continuation on Wednesday argue that the all-time high may be in reach.
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