Waiting for the kiss

The S&P 500 has reached new record highs and has kept up surprisingly well all week. Will this market just keep climbing without looking back? Maybe.
The S&P 500 chart may offer us a few clues:

^SP500 (Daily)  10_15_2014 - 7_15_2016

There is no clear overhead resistance level at this point. But the Earl indicator (blue line) is turning down already and the MoM has reached very optimistic +8 level, which is quite rare. This suggests that we “should” get at least a bit of a pullback here.
When a market breaks out from a long sideways pattern it is classic to turn back and kiss the old support/resistance line before continuing in the direction of the breakout. In this case that would mean a drop back to ~2130. That’s my current base scenario, given that we remain in a lunar red period. But of course we cannot rule out that the market may climb even further before taking a vacation.
This market is bullish until proven otherwise, and I wouldn’t fight the trend. Let’s see if we get that kiss.

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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