today was a great day in the market. A number of important resistance levels were broken and prices held above them into the close which is psychologically important.
the SPY closed above the 200 day moving average (it previously closed above this on 10.27, but only stayed above it for a day and then it fell 8% from that point). Looking further back in time, there was support previously at approximately 126.00 where the price bounced off that level in January, March, June, July of this year and many times going back to 2006. Getting over this level is an important hurdle as support usually becomes resistance and vice versa. So … if we can hold above this level, we will eventually be able to use this as a support level in the future. Expect this 126 level to be tested over the coming week to test its’ strength, and if it holds we should have a strong bounce into the end of the year.
Dow Jones actually broke a level two days ago and tested it successfully as support today, it also closed above another key level as well.
The Nasdaq is getting close to all time highs although it has a little ways to go. Today it closed close above 58.30 which was another important level. It actually butted against a key resistance level and wasn’t able to cross it, but with all the other indexes showing such strength I would imagine we will be able to cross this in the coming days.
Looking at all the indexes using a 15 or 30 minute chart, you can see that we were in a tight trading range for the past week and today we finally broke out of that on the upside. Another very strong sign. This tight range was ‘consolidation’, which should hold as support on future declines … so I have to think that (knock on wood), the worst is behind us and we can resume the uptrend that we were in earlier this year.
Granted … now that I said that … we will probably fall hard from here 🙂
My only concern is that volume is really not showing conviction, but this isn’t abnormal, most traders just like to see the volume confirm the strong moves. Yesterday’s numbers were almost alarming, but today looked more in line with an average day. I still don’t think we have to worry about a major drop at this point (a retouch of the lows), but this low volume may indicate we will drop a few percent and continue the consolidation for a bit longer.
have a great evening …