Pushing higher again

Stocks refuse to go down. Last week we mentioned the possibility that the market may break out to the upside, and it starts looking as if we are getting just that. Here is my updated chart for the S&P 500 (click image to enlarge it):

S&P 500

After bumping into a ceiling of overhead resistance for almost two weeks, the S&P is surging higher again. We see a clear breakout on the chart, and the road to ~2200 seems to be wide open now. Of course, the market likes to take the path of max confusion. A little drop to ~2000 would have investors wondering whether it is a false breakout or not.
Technically, the Earl2 (orange line) is starting to look very stretched and ready to flatten out and turn down. The faster Earl (blue line) has dropped back below zero during the sideways pause and will probably paint a divergent second peak in the coming days. This is a dangerous setup and I think the market is ready for its first post-ebola dip.
We will be entering a new lunar red period later this week, which may also add to downward pressure.

All in all we have a market that appears very stretched, and any bit of “bad” news could knock 50 points off the S&P 500 within days. Of course, quite a few investors and fund managers who have missed the boat are waiting for such a dip to get back in. So, I would not be surprised to see strong buying as soon as we get any kind of dip. Maybe that will be our topic for next week.

Stay tuned,

By Dan

Author of LunaticTrader and Reversal Levels method. Stock market forecasts based on proprietary indicators, seasonal patterns and moon cycles.

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