OT : Fib Timers newsletter...
S&P 500 Index (SPX) Chart Analysis
Last week we wrote:
"...Right now the markets are over-sold and the odds for a rally are good. If we are correct about being at the beginning of a bullish 5 Wave advance, we should see higher prices over the coming months. On December 14th, the SPX closed at 1272.74. This was above a strong resistance level at 1263. That close, above resistance, still forecasts a run for the next resistance level which is at SPX 1289. "
This week:
This week may very well have defined the U.S. stock market for the next several months. All indices broke out to new highs on huge volume and good breadth.
The small caps (see the Small Cap Timer) finally started their move as well. They have been lagging the S&P 500 and the Nasdaq 100 for months, and we now expect them to play catch-up to this powerful market rally. Many do not consider the small caps to be important, but if they lag, eventually, in our experience, any rally will fall apart.
Initially, Monday's huge rally did not convince us that we would start a new bull rally. It was possibly just a reaction to a very oversold market that had even declined during the holidays, which was quite unusual.
But the advance continued, across the board, all week. Today, all major indices broke out to new 5 week highs. That not only is bullish in its own right, but in the process, it formed a huge outside reversal week. You may not remember that the market sold off on Monday. Yup, another morning rally fizzled. But this time the buyers stepped up to the plate and overwhelmed the sellers, sparking the huge triple digit rally.
We are now just a fraction below the next resistance level and target for this rally, at SPX 1289. We have come a long way in only five days, so some consolidation is to be expected, but we do not expect it to last long. A decisive close above SPX 1289 will forecast a run to at least SPX 1318 (see chart below).
If we are right in our current wave analysis, we have just started a Wave 3 advance. Wave 3 is the largest wave in a series of 5 waves. This means we should see at least a better than +8.5% total gain in the advance.
The trend for the S&P is UP. We are in a BULLISH position in the Rydex Nova Fund (or other bullish S&P index fund).
Signatures are so yesterday!
