• Trend turns neutral on S&P & DJIA
• NASDAQ trend still up. Stop 1864
• Rates still climbing

Last week’s price action took out the up trends in the S&P 500 and Dow Jones Industrial averages. I have removed “trend” from the bullish side of the ledger.

We are likely entering a trading range bound by last week’s highs and lows not yet established. Friday and Monday’s rally was on light volume and each day exhibited poor breadth suggesting more down side.

Today, bonds are down full point. In the last 30 days the 10-year Treasury rate has climbed from 4.50% to 5.25%. The stock market can make adjustments and deal with a higher rate environment providing there is some end in site (to the rising rates). Today’s bond action is telling me that the rate move is not over and that means more down side in the stock market.

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Posted by Michael Chapman at 4:06 PM PDT

I suggested in the May 2 posting that May would be a repeat of April, and that prices would drive higher through May. That is what happened. We then grew cautious in the May 16 posting and suggested that a correction was imminent. We got a pause, a small 3-day pull back, and then a push to new all time highs by the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (TRAN). The broader S&P 500 average also moved closer to all time highs.

When markets “mark time” and move sideways rather then down during corrections they are telling us that they want to move higher. A failed sell signal becomes one of the best “buy” signals the market can give.

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Posted by Michael Chapman at 12:00 PM PDT