Could SPX Be Building Yet Another Power Move?

Dec 14, 2009: 6:59 PM CST

When looking at the daily S&P 500, I had to scratch my head and ask myself, “Are we getting ready for yet another power-move up that begins as a result of another Short-Squeeze?”  Let’s see what I mean.

Look back to the “Failed” Head and Shoulders pattern that spurred the relentless multi-day rally in mid July.  After that, price looked like it was going to arc over and then retest lower levels in August… but we were treated with yet another four-day non-stop rally.

This continued in early September, October, and November.

I have to ask – to be objective – is this the start of another power rally just like the other ones?

We’ve had four days up in a row inside of this tight trading range which has yet to break yet.

If we did get any sort of upward move tomorrow or Wednesday, then we would solidly expect bears or short-sellers who have tight stops above the key 1,121 50% Fibonacci Level to cover quickly, which will trigger another Power Rally as stops are taken out and new buyers rush to buy as a key resistance level is broken.

That’s the beauty of the market – it’s based on supply and demand on a large scale, and so we can’t say with certainty “This level will hold” or “This level will break.” Large moves in the market often begin when one side of the market digs its heels in and then price moves against them and the rush for the exits.

I’ve mentioned this in prior posts, including:

New S&P 500 Highs Forecast by Fifth Sprung Bear Trap” (correct)

A Look at the 12 Failed Sell Signals in the S&P 500” (more now)

The widespread thinking seems to be that price will retrace down from here and that may indeed be the case.  But if price does start to sneak up to 1,121 and breaks through… be ready for history to repeat and to see an upswing that will probably be similar to those I’ve highlighted above.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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8 Comments

8 Responses to “Could SPX Be Building Yet Another Power Move?”

  1. branthammer Says:

    Possibly going to have a blow off top? I'm a long term bear, but you simply can't fight this tape. If stocks keep rising I'll keep buying. This is where the protective puts come in handy. If the “End The Fed” movement starts getting some steam I think Bernake's hands might be tied. The melt-up could see it's end days soon. This is a great little article everyone might find interesting about the corrupt monetary system, the Federal Reserve, and the Constitution. Just the quotes alone are worth the read. Take from it what you will, but the founding fathers warned us about this. It goes well with my “end the fed” theory stopping Bernake, at least somewhat.

    http://absolute-investments.blogspot.com/2009/1

  2. reggieperrin Says:

    Dec expiry cd well be a catalyst

  3. reggieperrin Says:

    Dec expiry cd well be a catalyst

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