Friday Rally Gives Way to Monday Sell Off - Posted by Coolhand

So, maybe the Friday rally was a head fake? Monday's open was less than inspiring and it got worse in afternoon trading as both the S&P and DWCPF were beaten back for sharp losses on the day.

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The pullback did not do a whole lot of damage to the S&P chart, but it did push price back into the upper end of the S&P's recent trading range. Momentum dipped. The DWCPF failed to hold its 50 dma and closed at a fresh multi-week low. Momentum continues to fall on this index.

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Cumulative breadth fell sharply on the NYSE, but the signal remains bullish.

So, Friday it looked like we might see some upside follow through given the strength of the rally and Monday opens flat to negative and gets worse from there. The market has yet to fall apart (not that it will), but we have 2 charts that are telling us a different story. The S&P remains a bullish chart, but the DWCPF is neutral. If inflation really takes hold, I'd expect to the see the DWCPF sell off. Are we seeing the early stages of this over the past few months? Is the big money slowly preparing for such a scenario? Money has to flow somewhere, and the S&P has held up pretty well; pullbacks notwithstanding.

I remain bullish, but cautious on the S&P. I was bullish for the short term on the DWCPF, but I am going back to an overall neutral perspective on that index.