An exhausted bull, or a bear trap?

Mid-week market update: How should investors and traders react to the recent stock market weakness? The bears will argue that the S&P 500 spiked past a trend line resistance and fell back, which is an indication of bullish exhaustion. Moreover, the 5-day RSI recycled from an overbought condition to neutral, which is a tactical sell signal. The logical initial downside target is the 3840-3900 zone, which represents about a 5% pullback.

The bulls will argue that the bull trend remains intact. The S&P 500 is rising steadily in a channel, and the recent pullback is just a bull flag, which is a bullish continuation pattern. The market can go higher.

This is where the interpretative part of technical analysis comes in.

The full post can be found here.