Tuesday, February 24, 2015

Where is the market going? $SPY $DIA $QQQ $IWM NYSE

Here's a 2-year view of SPY - a steady and powerful uptrend:

Now, let's focus on the past 6 months:

I consider a H&S top failure, which I learned from Peter Brandt, to be its own pattern that can launch a strong move up. SPY recently broke out of a 5-week consolidation rectangle and is on a steady uptrend with a possible (never guaranteed or certain) price target of around 216.

Let's see if the charts of other stock indexes are supporting this breakout in SPY.

First, the NYSE index:

For NYSE, a decisive and sustained close above 11106 (July 2014 high) is necessary to support the breakout view.

Finally, the Russell 2000 small-cap index (IWM):

The Russell 2000 seems to be breaking out after getting turned back around the 121 level three times in the past year.

Of course we are dealing with only possibilities. Investors and traders' emotions can change quickly. A breakout can reverse anytime and lead to pattern failure. That said, these charts indicate that the historic bull run that started from the March 2009 low in the stock market is likely to continue, at least for now.

Don't fight the market. Don't try to anticipate the market move too much. Instead, participate with strong trends. If you are a bear looking to short the market, I think I understand your frustration. Remember that trading is about what is happening and not what is "supposed" to happen. Leave aside your beliefs and focus on what you see. And remember, there will always, always, always be more good trade set-ups.