The market is in a seasonally weak period, i.e., all the sell in May mantra, and this has created a number of bearish technical setups for the S&P 500 Index. I am not showing all of them; however, the bulls are making an effort to kill off the head and shoulder top pattern (dashed lines). This market action is creating two potential bull flag breakouts. The breakout is also resulting in the S&P 500 Index to trade above its 50 day moving average. Importantly, the larger bull flag pattern has occurred on a strong upside move off of the February low. The potential bull flag breakout has occurred on lower selling volume as well. Lastly, the money flow index (MFI) and stochastic indicator are showing favorable bullish indications.
As we noted in our post at the end of last week,these positive technicals seem to be occurring at a time fundamental headwinds seem to be easing.