SLAP CHOP FEVER

Let’s be real.

No one misses cable TV.

But if there’s one thing I do miss, it’s the infomercials.

Billy Mays had the football uniforms spotless.
Tony Horton had the whole house shredded with P-90X by summer.

And lately, the S&P 500 seems to be all in on the “ShamWow guy” and his hit product the Slap Chop.

The S&P 500 is stuck in a choppy, range-bound mess.

And as we’ve talked about before, when there’s a range, it becomes a SHOW ME game.

As a technician, one of the best "show me" indicators is breadth.

It helps gauge the market’s "weather conditions" so we know what kind of clothes (trades) to put on.

I love using New 52-week highs and lows for this. 

It’s hard to sustain a market rally if the stocks within it aren’t consistently posting new highs.

Simple? Of course.

But we often need to be reminded more than we need to be taught.

This past year was strong.

The persistence in stocks making new highs, while new lows stayed tame is a sign of strong trends with follow-through.

And follow-through is what leads to new highs.

Right now? Both new highs and new lows are muted. 

That suggests rotation.

• Stocks that were near new lows bounced.

• Stocks that were near breakouts pulled back.

Rotation is often called the lifeblood of a bull market. 

I don’t disagree. And it’s for sure not a reason to be bearish.

But at some point, this rotation needs to lead to strong trends 

And we’re not there yet.

SHOW ME.

A piece often missed when sharing information is context.

So, for context:

The S&P 500 is still in a longer-term uptrend, so we should still maintain a bullish bias.

• The 200-day SMA is sloping upward.

• We have well-defined risk levels if things start to break down, price will let us know.

BUT in the short term? It’s trapped in the Slap Chop zone.

Between $580 and $610, it’s just a chopfest.

I also added the ADX line to the chart this week, and it's at its lowest level since September 2023.

ADX measures trend strength and right now, it’s confirming what we already see:

No strong trend.

For me, it’s simple right now:

No changes to my longer-term positions.

Shorter-term? I’m waiting for:

• An expansion in new highs to confirm the next leg higher in the S&P 500.

• A resolution out of the Slap Chop zone where I have defined risk to add against.

Until then, it’s a waiting game.

In choppy markets…patience pays. 

Check out the first 13 minutes of this livestream I did for the homies at Stocktwits.

I break down the muted new highs and lows action, plus the rotation that still hasn’t produced strong trends at the sector level.

Put it on 1.5x speed and let it rip.

Cheers!

Larry Thompson, CMT CPA

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