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SPX and US Dollar: Rally Likely Only Halfway Through


Odds are good that this is only the mid-point of this rally leg.

MINYANVILLE ORIGINAL Last update, the market had finally flipped me from bullish to neutral -- but I noted that the market was clearly set up for a large directional move (in fact, I titled the article 2013 Should Come in With a Bang). I also noted the market seemed to be waiting on the fiscal cliff resolution.

I've been pretty consistently bullish since November, but I won't deny that by last update, the bears had shaken my faith quite a bit. They pushed the market right to the edge; however, I felt they had not yet tipped it over and that critical support had not yet been breached.

Well, now we have our resolution and -- proving that procrastination can be a winning strategy -- Congress has managed to live up to the phrase "Necessity is the mother of invention."

There is a very bullish set-up in the charts, and it's likely that we're only about half-way through this leg of the rally (with potentially much more to come over the long-term). November's intermediate target of 1490 +/- seems quite likely to be reached in the next few weeks or sooner.

As I noted in the last update, the Philadelphia Bank Index (INDEXDJX:BKX) was signaling the potential that the entire decline was complete, and overnight futures are now indicating that potential is indeed the reality.

The short-term BKX chart, which was posted as a waypoint on Monday, is updated below:

Click to enlarge

Given where the futures are trading this morning, the bear count is likely to be invalidated directly upon the open -- and a big gap up fits the pattern of a nested third wave rally (the expectations of the pattern) therefore, I'm not inclined to update the bear count at this time. I feel the bear count will become extremely low probability once the market trades above 1448, and that break will all-but-guarantee new highs above 1474.

At this point, it will take something completely unexpected, or a break of 1398, before I consider the bears as serious players again.

Click to enlarge
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