S&P 500 – 1,850 Broken But Residual Bullish Pressure Remain

US Stocks traded lower yet again, but the decline seen yesterday is milder than that of Wednesday. This is rather surprising considering that there were good reasons for bears to go for the jugular and aim for a convincing break of 1,850. Firstly we have Q4 GDP figures that came in at 2.6%, lower tan the expected 2.7%. Secondly, Pending Home Sales have fallen by 10.2% Y/Y, a much more aggressive pace compared to the -9.0% expected. M/M gauge has also fallen -0.8% surprisingly when market was expecting a slight growth of 0.2%.

To be fair it wasn’t all bad news though. Initial Jobless Claims were slightly lower than expected at 311K for the week of 21st March, while Continuing Claims have fallen to 2.82 million. Similarly, Personal Consumption has also increased by 3.3%  versus the 2.7% consensus estimate. On top of all these, there is finally good news on the manufacturing front with Kansas City Fed activity climbing to 10 versus expected 5.

However, it should be noted that all the above good news are not really prime movers, and the worse than expected GDP print should have trumped all the other peripheral good news. Given that US traders have been spotted to be more bearish than the rest in recent days, such major disappointment should have sparked an even greater decline yesterday.

Hourly Chart

Hence, the lack of strong bearish response is a sign that bullish strength remains. Given that yesterday’s low fits into the newly formed descending Channel, the possibility for a push towards Channel Top cannot be dismissed. Nonetheless, a break of 1,850 is necessary for stronger bullish conviction to take place. Failure to do so would reopen Channel Bottom as the immediate bearish target and we could even see faster bearish acceleration lower as it is likely that the bulls who have been putting up a valiant fight will be disappointed.

Daily Chart

Daily Chart is bearish as prices have broken the rising trendline and should the break of 1,850 is confirmed a quick move back to 1,812.5 support is likely. Stochastic indicator agrees as we are back within the bearish stoch cycle, with half a cycle remaining for strong bearish follow-through.

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