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.

Where does that leave markets? The technical backdrop really hasn’t changed very much. Short-term momentum indicators were overbought two weeks ago suggesting a pause or pullback was likely pending, and this is now underway. Some of the overbought condition is working off, which technicians like to refer to as being “a correction in time not magnitude.”

The bottom line is that I see further consolidation likely over the coming 1-2 weeks but would note there are now two key s...

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