The S&P500 and overall market took a bullish rebound Thursday with a couple small increases on either side of it. The close Friday rebounded from early profit taking to close higher. The rebound above the 13 EMA is very bullish. It looks like a lot of the constituent stocks could go higher here, so a continued up push looks likely.
Friday could be seen as a confirmation that the market wants to move higher, as it began the day moving lower and rebounded to close higher. The pullback early in the day was understandable, as some profit taking is likely after one day moves like the one we had on Thursday. I feel the rebound and close above the previous day’s close, the close very near the day’s high and only slightly lower than the previous day’s high, along with being the second consecutive close above the 13 EMA are worth taking notice of.
The 10 trading day indicator that began on 11/16/2010 is performing as follows:
+1.81% / *0.00% / +1.81% Format: Highest Close % / Lowest Close % / Current Close %
* The lowest close percentage only considers closes lower than the start date.
The ten trading day indicator suggests when chances are very high that a closing price of 3 to 5% higher than the closing price of the day it began will happen within ten trading days. It’s not a certainty that this will occur, it only indicates that the chances are much higher than normal that it could.
Things to look for in the week ahead:
The S&P500 index is currently 0.24% above the 13 EMA and 2.42% above the 50 EMA. The index remains near an oversold condition with a 13 day stochastic of 45%. Many of the constituents are oversold, many have begun rebounding off bases they were developing prior to Thursday’s run, and many that were falling prior to Thursday look to have begun to base. Overall the flow of the constituents looks to be shifting to turn higher, and this often indicates a very bullish run is developing.
Further, the index faltered briefly early in the final hour of trading, falling back below the previous close and just below the 13 EMA, and then rebounded to the daily high and finishing slightly lower than the high into Friday’s close. This could indicate the institution buyers are still adding. It is also an early indication that the 13 EMA could be developing into a support level. If the 13 EMA turns into support, we could be heading into a run that could take us into the New Year.
If this run develops as it appears it might, we are likely to experience a slope change at this junction, although this slope may not appear until after we reach a new yearly high. The steep slope we were running in prior to this pullback is not likely to return, as this type of slope is usually seen during the “catch up” phase after an excessive pullback. So if this run develops, it will likely be with a reduced slope.
We still need to be cautious of a technical breakdown as pointed out in the 11/13/2010 article, but at this point, any pullback to or below the 13 EMA on the Index could be a buy indicator, as the chances that it fully develops into a support level are very high given the current market conditions.
There is no certainty that this run will develop, but chances remain high that it could. Additionally the historical seasonal characteristics of the market and the current market conditions would tend to support this outcome.
Although I believe there is a high likelihood the market will react within the historical manners I have outlined, there are no guaranties it will, or that any of the indicators I am developing will react in the manner that I believe they will, or that I have not yet discovered market tendencies that could increase or that might decrease the chances of these indicator’s success. There are outside influences (i.e. news, world events, etc.) that could increase or decrease the effectiveness of these indicators. These indicators remain under development, and may or may not include added refinements as my research progresses.
Have a great day trading,
Disclosure: I am currently about 94% invested in stocks at the current time.
Disclaimer: This article is intended to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.