SPX - this rally could have legsDespite that bullish engulfing candle with strong volume on 13 Oct, the market continued to climb a wall of worry for the next 5 days. However last Friday's strong close is a "follow through" day that added to my conviction that this rally could last a fair bit.
On the Monthly Chart (not shown here):
A potential "bullish piercing candle" (monthly ) will be formed if by the end of this month we have a close above 3762. So let's see!
On the weekly chart:
1. SPX had rallied after testing the first major support @ 3500 on 13 October (last major support is around 3200, may not get there)
2. we see bullish divergence playing out
On the daily chart:
if SPX can close above it's immediate resistence @3800 (a mini inverse H&S neckline and also the 50% fib retracement of the recent XY down swing, then it could attempt to rally (minor pullbacks not withstandng) towards 4100 (inverse H&S target, incidentally 4000 - 4100 zone is critical as it also where the major downward trendline resistance is. The bears and bulls will be having their last battle here.
Could this be just another bear rally (albeit a strong one) or could the market have bottomed out at it's most recent low of 3491? I guess we will never know for sure except on hindsight.
The market seem to be resisting much lower levels than 3500 (at the worst case we could have a double dip back towards 3500 within the next few months although I feel the chance of market going lower than that is diminishing. Still protective stop loss is must.
p/s Fed starting to sound less hawkish in the coming days could be the ultimate signal for the bulls.
definition of "follow through day" here: www.investors.com
Disclaimer: Just my 2 cents and not a trade advice. Kindly do your own due diligence and trade according to your own risk tolerance and don't forget that money management is important! Take care and Good Luck!
