Well well well, we had a relatively stable day of trade. Right out of the gate the S&P 500 began advancing ending up 4.63% falling with in pennies of our confirmation level. There are several things that leave me to believe that even though falling $0.50 below our confirmation level, we are now in a position for an advance.
Volume dried up significantly today. This is usually a signal of a reversal. It doesn’t always happen right at the turning point but is typically a good indication of a coming change in direction. The ADX line crossed above the negative DI line. This is an indication that the market has over taken declining issues. The uptick on the MACD histogram is an indicator that momentum is beginning to shift towards bullish pattern. And the stochastic is rolled over today as well. I am less inclined to believe the stochastic because it has had a bad track record with me recently but when multiple indicators are in agreement, you can be relatively certain that there will be a change in direction.
So where do we go from here? I suspect that tomorrow we will make it above the 10 day EMA (exponential moving average) and mark the beginning of our move up. Over the next week or so we will probably go to 1220 or 1250. Keep in mind that 1250 is a stronger level of resistance (as our neckline that was tested several times as support) and will most likely see a reversal there. 1220 is also a relatively strong level of resistance (the level at which we got QE2), but not as strong as 1250.
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