Punching Through Resistance: The Short Term View on the S&P 500

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I have been talking about the major break out in the S&P 500 since July when it made new all-time highs. Four months later seems many analysts and traders are joining me in looking for a major move. Welcome aboard the bus people. The S&P 500 has not done much since then though so what makes it significant to watch closely now? I can’t speak for what changed for the johnny-come-lately’s, but Tuesday was a key event for the index.

The chart below explains why. It starts back following the Brexit move lower. From that low the S&P 500 ($SPY here) ran higher quickly. It stalled as August approached for about two weeks and then managed to make a new all-time high in August. But just barely. From there it pulled back and retested the prior high. And then traded in a channel between that prior high and the support level after achieving the new all-time high.

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Then came the pullback into the election. This was as the FBI was re-opening the case against Hillary Clinton. You draw your own conclusions, I do not care why. What I care about is that it re-touched the 200 day SMA and bounced. This set a higher low. Then the move higher started. This set up a Positive RSI Reversal, a technical pattern that gives a target over 229, or about 2290 in the index. And this is where Tuesday became significant. Tuesday the S&P 500 ETF moved over that prior channel, confirming a short term break out. The next step is a new all-time high close. But the S&P 500 seems on its way.

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