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business newsBulls Set for a Breakout
Probability of a break southward has declined dramatically.
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My only contention is the volume was lackluster at best. Nonetheless, the break occurred and only left one sister, the eldest (the Dow), below its respective 200-DMA. So at this point, does an investor jump in with both feet and hope for the best? If this is a complete cyclical (1-5 years) trend reversal, there's one more significant technical action needed - confirmation.
Most technical actions have a retest, especially if they occur with low volume. For a breakout, what once was a resistance ceiling should now be a support floor. The SPX never broke its smaller secondary upward trend, unlike its younger sisters (the NDX & the Russell (RUT)), and is therefore still intact.
Once the market broke through the 930 level yesterday, and didn’t reverse, this should be the new floor. As for the now-infamous "grand" (1,000) level the SPX grappled with in October and November of last year, that's only a chip shot from here.
Click to enlarge
As previously stated, my concerns are manifold, given this latest move - but, in the nearly 20 years I’ve been managing money, that’s precisely when the market throws you a curve. It's just a matter of how you handle the pitch.
So, to answer aforementioned question: As long as the market’s secondary upward trend remains intact and has a successful “low-volume” retest of the 930 area, the market remains bullish, and the probability of a break southward has declined dramatically.
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