The S&P 500 has been struggling to gain ground this week.

Okay… “struggling” might be an overstatement. After all, the index closed yesterday just two points below its all-time high.

But after last Friday’s buying binge – which recovered everything the market lost during last Wednesday’s one-day-decline – the momentum turned bullish. Stocks should have been able to push higher this week.

But so far, they’ve struggled. And right now, the daily chart of the S&P 500 looks slightly more bearish than bullish. Take a look…

The S&P 500 made a new all-time high on Friday. But you can see how all of the various technical momentum indicators failed to make new highs. This “negative divergence” is often an early warning of a potential reversal.

The divergences can be eliminated if the market can rally hard enough to push the indicators to new highs. Frankly, though, if Friday’s massive buying binge couldn’t do it, and if yesterday morning’s big rally couldn’t do it, it’s hard to imagine what sort of move its going to take to get rid of the negative divergence.

So, any upside from here is probably limited.

If the S&P can close above the 2583 level, then I can make a case for a move up to the 2595-2600 area. But, if the negative divergence starts to play out, then keep a close eye on the 9-day exponential moving average line at 2570. If the S&P closes below that level, then there’s a good chance we’ll finally get a test of the 50-day moving average line – which is all the way down around 2517.

Best regards and good trading,

Jeff Clark

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