By Lawrence G. McMillan
This past week, the stock market fell again. The bulls tried to engineer another rally attempt but once again, it was thrown back in their face, as the bears pushed the S&P 500 index to new relative closing lows (although the intraday low was set on May 12).
This is the third strong rally attempt since April 28 that has quickly failed. The bears have been relentless in their efforts to sell into rallies. Thus, the downtrend in the S&P /zigman2/quotes/210599714/realtime SPX -1.70% remains intact, as lower highs and lower lows continue to appear on the chart.
The bears’ aggressiveness, however, has produced and/or exacerbated oversold conditions. Those oversold conditions have stoked what rally attempts we’ve seen so far, but eventually there will be a stronger oversold rally – one which carries to and above the declining 20-day moving average (which is currently at 4120). Above there, resistance exists at the 4300, where two of the previous “one-day wonder” rallies died out.