On Tuesday the SP500 bounced off of trendline support and is pushing up against trendline resistance. Today's action was not sufficient to confirm the resumption of the uptrend, but while there is resistance to overcome, the subtle point not to be missed is that the close today was above the low of the February high day and above the March high.
Perhaps it all hinges on the Dollar, but if that is the case, the options remain open either way until the Dollar either rolls back over in earnest or moves past resistance at 76.88. At the moment, I am leaning toward another retest of the recent low in the Dollar, which should support stocks and commodities, but we may need a couple of more days to find out.
The sentiment picture as measured by the PPO of the equity only put/call ratio has definitely reached a more bearish level as traders are hunkering down in anticipation of a much telegraphed top in the stock market. This would seem to contradict a near term top. It also shows that what people say and what they do are often very different things as the chart below contrasts the sentiment surveys. I think this chart will tell a different story when we actual approach the top.
Finally, the seasonal pattern for pre-election years suggests this week's low may be an important one, at least in the near term, as it portends a rally in stocks until at least the first of July and maybe even into August. The 12 year annual average of the SP500 shows a rally into at least the first of June is imminent.
All of the above taken together suggests a rally in stocks for another two weeks is more likely than the alternative. Yet, we will have to keep an eye on the Dollar.