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Well, it seems as if a new bullish trend is developing. Yesterday the VIX, the volatility index, closed under resistance at 33.50. The Nasdaq volatility index, the VXN, also broke resistance. The Dow Transports have remained above major resistance of 300 that it finally broke last week. This level is quickly turning into support.
So, assuming this bullish tenor holds and the results of the bank stress test are along the lines of what the Street is expecting, where do we go from here? A look at the chart of the S&P 500 below (click to enlarge) shows a minor resistance level at 935. If we can clear that, it looks like smooth sailing until major resistance at 1000.
Hope you have your buy lists ready!
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The performance of small caps relative to large caps is a helpful indicator. I also like to compare the NYA to the SPX. When the NYA and RUT are outperforming the indications are for decreased risk aversion and a bullish trend. When they start to lag, like during the last week (along with NDX), it can be an indication that a pullback is in the offing. I am expecting a pullback to SPX 880 before an assault on the resistance zone around the 200 EMA at SPX 975-1000. Check out my blogs at seekingalpha.com/insta...