Wednesday, May 14, 2014

US Equities Finally Reach the Decision Point

Last update expected the S&P 500 (SPX) would rally to new all-time-highs, and we didn't have to wait long for that expectation to prove out.  The market has finally entered the key upside inflection zone, so this is where things will get interesting (for the first time in a while -- thank goodness!).

In a perfect world, I'd like to see SPX head a bit higher -- but if this breakout is a head-fake, the market is going to want to throw a few more curve-balls in here, and the rally is likely to end abruptly and unexpectedly.  I've added a bull count to the chart below, and in the event of a sustained breakout through the upper red trend line, then we'll have to consider the potential that the last few months were a coiling pattern headed for the upper-1900's or beyond.  Until that breakout comes, though, bulls will want to avoid complacency in this inflection zone.

I've updated the near-term support/resistance chart below.  There are a couple confluences of support that should help offer clues as to the strength or weakness of the recent breakout.

I've also updated the NYSE Composite (NYA) because the pattern here gives us a near-term upside level to watch for clues of market strength.

In conclusion, the new all-time-highs in blue chips came as no surprise, and SPX is now sitting inside the key upside inflection zone of 1900-1920.  If it can push through this zone, then bulls will have something of an "all-clear" signal.  But as of yet, the breakout hasn't been substantial, and we're continuing to see weakness in beta indices -- so this is no place for complacency.  Trade safe.

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