The S&P 500 (SPX) has climbed almost 19% since the low in June, and the ‘glass is half full’ people are taking this as proof the bearish trend is over as they look forward to higher prices, writes Ian Murphy of

The half-empty gang says it was a reaction rally and the bear market in US equities is only beginning. Let’s take a more scientific approach and measure the contents of the glass.

There is no doubt the latest rally caught most market participants by surprise, and thankfully the Daily Help Strategy captured a nice chunk of the move, but Friday’s pullback in US equities stood out for several reasons and the bullish trend may be over.

As mentioned previously, the S&P500 touched the 3ATR channel on a daily chart so a pullback was to be expected, but the decline on Friday occurred across the breadth of the entire stock market and was not just confined to high-profile tickers and out-of-favor meme stocks.

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The Composite Help indicator (orange line) tracks every US stock on monthly, quarterly and yearly lookback windows, and Friday was the first time it closed below zero since the bullish rally began in mid-July. Things are not well under the surface when all stocks decline in all time frames.

Taking a step back for a moment to look at the bigger picture (insert chart), we notice the S&P 500 printed a false upside break of the 1ATR channel on a weekly chart before leaving a reversal bar behind. This places the index back in the neutral zone, meaning it failed yet again to get into a bullish trend on a weekly chart despite the 19% rise from the June low.

The US market is at an inflection point, and the 21-period Exponential Moving Average (EMA) is the line to watch going forward. If this is the beginning of a second lower high pattern on a weekly chart (glass half empty), the EMA at 4120-ish will fail to hold as support during the coming weeks. If it does hold firm and a higher low pattern forms (glass half full) another rally attempt at the 1ATR is likely.

In the week ahead, ensure all risk management tools are in use because the abundance of nervousness out there will magnify a downside move if one happens.

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