Bulls should be grinning from ear to ear at the close today after an impressive rally that brought the markets to their most recent highs. More importantly, the VIX closed below 35, the Dow Transports closed above a level it hasn’t been able to since July, and XLF closed above $12.40. If those bullish technical events weren’t enough, the dollar broke below support, the euro broke above resistance, and copper and oil settled at their highest levels in about two weeks.
We don’t much care as to why the market was up today, we just care that the technicals continue to look bullish at the moment. Today’s move higher leaves a bullish gap on the charts that may need filling. However, should the markets retrace to today’s gap and manage to find support the recent uptrend will remain very much in tact. With SPX closing at 1,194, the index closed above its 50 day sma (currently at 1,175 – watch to see if it provides support) for the first time since July (as did TRAN) but still below channel resistance at 1,200.
We expect the bears to be out in full force around 1,200 as a failure to keep SPX below that level will pave the way for more upside. As bearish as we’d like to be, the bottom line is there are a ton of bullish signals in the market at the moment. Until we see some reversals we’re not going to stand in the way of this rally. The reason is simple, it seems obvious to get short at 1,200 on SPX, and the obvious trade is never the right one. However, if we see SPX struggle to extend above 1,200, we will look to get short.
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- SH @ the close 3/20/12: Market fails to put in higher high
- SH @ the close 12/13/2011: SPX clings to 50 day sma; dollar surges
- SH @ the close 10/24/2011: Markets surge higher; SPX reclaims 1,250
- SH @ the close 10/27/2011: Bullish breakouts everywhere; SPX rockets
- SH @ the close 1/3/2011: Bulls flex muscle to start 2012; SLV surges