Strong Rush To And Through Resistance...
Jack Steiman from SwingTradeOnline.com at 02/17/10
Some sectors have gotten back through their 20- and 50-day exponential moving averages and some have not. Some are partially through like the S&P 500 which cleared its 20- day exponential moving average today and is oh so close to its 50-day exponential moving average. the Nasdaq had no trouble blowing through both today and it's good news to see the Nasdaq leading instead of following. When we see high beta leading we're happy. If defensive stocks and sectors are leading we know we have trouble brewing straight ahead but that's not the case over the past few days and thus this move looks to be for real.
This past weekend I wrote about the need for the bulls to get moving to try and recapture those lost 20- and 50-day exponential moving averages and how things were set up for them to do it. The key being the triple test of 70 RSI on the UUP or dollar ETF with negative divergences on their stochastics at elevated levels. MACD was elevated as well. A black candle was printed on the UUP and when that happens after a long move up at overbought with negative divergences, it's reversal time. Fortunately for my call, the UUP did fall very hard today allowing for the stock market to rise sharply. In addition, we had stochastics at low levels on the daily major index charts along with MACD crosses bullish. This set up, along with the UUP set up suggested a nice move higher today in equities and that's just what we got.
We had futures up overnight as Asia did fine as did Europe. We also had strong earnings for the most part pre market. We pulled back some with a few hours still to go before the open but we made those losses back up before we opened thus a nice gap up took place. It looked tenuous there for a while as we started to sink almost immediately but after an hour or so of churning, the market started to move gradually higher.
A trend that stayed in affect for the rest of the day. Once the bears recognized that shorting wasn't going to be the way for this trading day, they started to cover their positions with the market moving higher and higher. Not an explosive day and not through all important resistance on the S&P 500, but a very nice day for the bulls nonetheless. We closed on the highs basically and now the S&P 500 is only 3 points away from taking out that key 50-day exponential moving average at 1097. If that clears we will have the Nasdaq and S&P 500 on clean breakouts and that would obviously bode well for the market.
The PowerShares DB US Dollar Bullish (UUP) broke lower today off the black candle and printed a nasty full red candle that suggested the best of the move in the dollar is done for now. I'm not saying forever folks and I'm not saying there won't be up days. Of course, there will be counter trend days but the best of the move i feel is over a for a while at least meaning there's a good chance the market should see some further upside over the coming days and weeks. Not straight up of course but up overall.
The financials are behaving better and if the SPDR KBE Bank (KBE) can break above its 50-day exponential moving average, that would be hugely bullish for this market for when the financials get involved, and they have lagged badly, that could be the final straw for the bears for a while. The bears have been able to keep the market down to some degree by nailing these stocks quite frequently but now it appears the financials may be ready for some solid action higher. This is something I'll be watching very carefully in the days ahead. if the financials break out then there will be no stopping the S&P 500 from blowing through 1097.
Nothing is easy here. We've had a nice run off the March '09 lows. The market is suggesting higher prices short-term overall but getting back anywhere near 1151, the recent highs on the S&P 500 is not going to be an easy task for the bulls. This is not a time for long-term playing. It remains a traders market. It is what it is. Nothing overboard but let's play what the market gives going forward. The oscillators on the daily charts say there's room with the usual pullback's along the way.
