The chart below reflects the boys and girls and robo-traders of Wall Street enjoying their last game of chart-point Ping-Pong. As is evident, the squeeze is on, and we don’t think this particular triangle “resolves” with another breakout into the financial stratosphere.
When the market peaked at 2873 on the S&P 500 back on January 26, there were 170 points a daylight between the 50-DMA and the 200-DMA.
Since then, the range has drastically narrowed. As the market has progressively lost its mojo, the 50-DMA (blue line) has steadily declined—even as the statistical momentum of the blow-off top in January has carried the 200-DMA slightly higher.
The reason is simple: Both props which have levitated the stock market into the nosebleed section of valuation history are now coming undone.