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Further Market Consolidation Likely Over Next Two Weeks

The technical behavior of the market was particularly interesting the past week given most major indices stalled but never really delivered a lot of downside follow through, as some have been fearing. True, the S&P did correct 5% on Monday through Tuesday with the average S&P 500 index (SPX) stock down 8% and many cyclicals were off over 10%. Overall, however, the pullback has been relatively orderly.

I continue to view the 15-day moving average (S&P 2757) as a reasonable proxy for the short-term uptrend of the market, so it was noteworthy to see the SPX quickly hold above that moving average through the week and merely consolidate in a sideways range. In addition, the weaker Russell 2000 also held above its 15-dma this week in a similar narrow sideways range which I discuss below.

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