Wednesday, June 16, 2010

B-B-B-Breakout

After remaining range bound for seventeen trading days, the SPX was finally able to muster enough momentum to breakout. While it remains to be seen how much follow through we experience over the coming days, the bulls definitely scored a victory with yesterday's pop which did some notable technical damage to the downtrend in place over the last two months. Just as we looked at potential downside targets in last week's On the Brink, let's highlight a few key resistance levels looming overhead.
[Source: MachTrader]

Fibonnaci traders considering retracement levels between the April 1220 high and June 1040 low are likely to point out the 50% and 61.8% retracements residing at 1130 and 1150. Skeptics of the whole fib approach could consider the 50 day moving average around 1140 and especially the prior pivot high at 1170. Either way, from current levels the SPX has room to run if it wants to.

One potential fly in the ointment I see that may sour any immediate follow through to yesterday's breakout is the fact that the SPX is up 75 points in six days. It wouldn't surprise me to see a bit of churning to digest this overbought pressure. What I, as well as any other chartists calling yesterday a breakout, would not want to see is a plunge right back into the trading range.

For related posts, readers can check out:
Retracements
The Market is Vewy Vewy Quiet
Old King Kol

2 comments:

A Traders Universe said...

Yes, you were right, and I expected a pull back but am surprised to its extent. I've been watching the AUD and the CAD in relation to the SPX for last 12 months, interesting correlation

QUALITY STOCKS UNDER 5 DOLLARS said...

A very wise post.