Europe still has a ways to go before they are out of the woods, but because the short term critical problems were addressed the markets continued to drift higher this week into the holiday. The underlying problem with the rally is that there has been very little participation. The volume has been low as the price has crept up. Friday was the only day where there was decent participation.
What we need to look for now is how do key resistance or support levels behave. The trend line resistance at $137.50 converges with last years resistance zone. Owing to the strength at that level and how oversold the market is (see Slo stochastic s) my expectation would be that the SPY is at a reversal point as long as the price doesn't close above the trend-line.
As you can see in the chart below we have reached the top of the bullish channel and so the price if it does reverse could head down to the $134 where there is some established support and channel support.
The bullish run is contingent on how central banks continue to aid economic development, especially in Europe and how jobs and the economy in the US can continue to gain strength.
Most of the moves have been pretty short due to the volatility in the market. I am still positioned short term and intermediate bearish, but a break above the bearish trend-line would move me to more of a bullish out look.
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Disclaimer: This article is intended to be informative and does not constitute a buy, hold, or sell recommendation., and should not be construed as personalized advice as it does not take into account your specific situation or objectives
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