AT40 = 58.0% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200 = 62.0% of stocks are trading above their respective 200DMAs
VIX = 10.8 (volatility index)
Short-term Trading Call: bullish

Commentary
The last week of trading for April transitioned readily from the French Fly that sent financial markets into celebratory dances to a subtly ominous Friday Fade that confirmed a market failure at the threshold of overbought conditions.

Just as I was preparing to craft a strategy for overbought trading, AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs), threw me for a loop. AT40 closed out trading for April with a plunge from 65.3% to 58%. In most cases, this definitive failure right at the edge of the overbought threshold would send me rushing to get bearish. Recall that AT40 pushed into overbought territory during much of trading on Wednesday. However, such a rush is unnecessary in a market where buyers and bulls thoroughly dominate and sellers have folded time and time again. Let’s see where we are when (not if) the S&P 500 (SPY) retests 50DMA support.

The S&P 500 (SPY) closed fractionally lower with the week’s bullish breakout well intact.

The source of the trouble on the day came from mid-caps, small caps, and financials in general. Each chart seemed to make a statement about the end of momentum. The SPDR S&P MidCap 400 ETF (MDY) lost 1.0% and reversed part of the week-opening gap up after three straight days stalled just under its all-time high. The iShares Russell 2000 (IWM) lost 1.3% and closed at Monday’s close after three straight days stalled at its new all-time high. The Financial Select Sector SPDR ETF (XLF) looks like it confirmed 50DMA resistance after it sank to a 1.0% loss.

The SPDR S&P MidCap 400 ETF  looks like it has topped after barely failing to notch a new all-time high.