Going forward (the next approximately one month), I see the market moving sideways for the following reasons:
In addition, the latest "rally" has been on very weak volume, indicating a lack of overall participation. While the IWMs have broken out to new highs, there has been no follow-through from the QQQs or SPYs, and the SPYs chart has been printing some very weak candles.
None of these conditions has changed over the last week.
For the last week, the SPYs have printed very weak candles and have stalled at important resistance levels. The volume has been weak. While the EMAs are bullishly aligned, my feeling is the weak volume and fundamental backdrop trump.
Although the QQQs have moved through resistance, they immediately formed a downward sloping pennant pattern after doing so. This lack of follow through indicates a firm lack of conviction on the part of market participants to take the market higher. Also note the lack of volume.
The Transports broke though key resistance, but then promptly fell back to the EMAs. Notice that Friday's bar was very long and on slightly higher relative volume.
The IWMs have been leading the market higher for the last 6 months or so. However, after breaking through resistance, they have also fallen, printing a large down candle on Friday. Also note how the last three downward bars also printed higher volume, indicating more participation on the sell-off than the rally.
Going forward, I still expect the equity markets to perform in a lackluster manner. The SPYs have hit resistance in the 134-134.5 area -- an area that I expect to continue providing resistance. Also note the the QQQs, IYTs and IWMs have not followed through on any of their respective rallies. I'm also expecting to see weaker prints of the economic numbers for the next few weeks, reflecting the impact of higher oil prices, the EU situation not being resolved, the aftermath of Japan's earthquake and China's continued move to increase interest rates.