The market has now put together six straight sessions of higher highs and high lows!
For the first time in a few sessions, the market failed to rally in the final minutes of trading. The S&P 500 point & figure chart above shows the price is in a triangle consolidation pattern which normally favors upside breakouts. As can be seen, we have a series of activated upside targets which remain unachieved. The activated downside target 1,106 was also failed to achieve today which is quite a positive for the bulls given we're in overbought conditions, though not maximal overbought.
We have seen both the Russell & Nasdaq lead the market higher since the July lows. Today, however, they both lagging even though the market is in tight consolidation. Could this signal deeper pullback ahead? I don't know, but at least it suggests to be more cautious on the long side.
The bottom line is that today's consolidation is exactly what the bulls needed. The short-term bullish indicator is not yet overbought, so the market still have room to rally in the next several days. I'd look for the S&P to find resistance at 1,130 if it's fortunate to rally further. As for me, I have initiated a small put positions in the SPY Index at this morning's gap. Obviously I will cover my positions if today's highs is solidly violated. More importantly I would turn bullish if the S&P remains above 1,090 in the next several days.
