Tuesday December 29, 2015
Key Data points:
Key Developments :
- Market makes higher swing high and closes above
- Cup/Handle sees breakout and follow through
- Market approaching overbought level on the stochastics
Today was a day of some key developments really for the first time in several trading days. After the gap and go open, the market consolidated just below the 2076.71 swing high resistance level for much of the day. This is until the buy programs came in to push the market higher and above the swing high, where it remained into the close. With this occurrence we now have a new Bullish cup/handle pattern in motion, targeting 2128.72. It will be important for the market to hold ideally above the prior swing high at 2076.71, but most importantly above the cup/handle breakout at 2064, to keep the bullish pattern in motion.
So where do we go from here?
Assuming the ugly reversal pattern that showed up into the close hovering above 2076.71 swing high can resolve itself to the upside (see below)
and not roll this market back over, the next real challenge I see is the down trend line and next swing high ~2093. Do Keep in mind we have seen many of these bullish pattern breakouts sold throughout 2015, so we must keep our eyes out for clues that the price action is becoming weak and reversing. One clue is the closing price action today. It did not trigger, but we must respect it. Remember, just 7 trading days ago, we were sitting in a very similar situation, with a bullish cup/handle and a bullish broadening wedge in motion, only to see a H&S top form quickly in the underlying price action, send the market reeling lower and killing off both bullish patterns.
The Bottom Line:
The bulls currently remain in control, but as we saw on 12/17, that can change very quickly. We have created a higher low and higher swing high with bullish patterns in motion. Trade in the direction of this until they acquire targets or reversal patterns appear and fire. The close today did offer us a warning sign, It did not trigger, but it is something we need to watch out for. This remains a very risky tape as trends still have not proven to last more than a few days.
Chart of the Day:
The Consumer Staples sector continue to look quite bullish above 50.50.