S&P 500 'Accelerates' to New 2009 Highs

After the S&P 500 Index gained nearly 7% last week, most traders were looking for some profit taking on the horizon. However, as of Tuesday sellers continue avoid this market.

Even with continued strength, there are bearish signals, most notable in Friday's CBOE Equity Put/Call Ratio and Wednesday's VIX Confusion, just to mention a couple.

That said, we are seeing a number of technical/momentum based indicators signaling long opportunities starting last Monday, but today's price action raises the bar...

Tuesday's close marks the second consecutive day the S&P 500 closed at 2009 highs-in my view; this not only re-confirms last week's breakout but significantly minimizes chances of another major downturn to March levels.

In addition, if we close 5% above the 200 day EMA (currently 1.9% above) I would rule out a retest of March 9^th lows all together.

Perhaps one of the most difficult momentum indicators to trigger a buy or sell for the S&P 500 is acceleration bands - the bands target the top 5% of bull and bear trends helping traders focus on the strongest moves. The signals are easy - a traditional acceleration band buy signal occurs after two consecutive closes outside the upper band while a sell signal occurs after two consecutive closes below the lower bands...

Why is this important NOW?

Tuesday's close marks the second consecutive close above the upper acceleration band meaning a bullish acceleration is expected in the market - this has not occurred since 9/19/07 (chart below).

The previous two signals were each SELL SHORT signals on the market on 10/07/08 and 02/27/09 (chart below). Overall, the previous five acceleration band signals closed profitable on the S&P 500.

S&P 500 Index - Daily - Acceleration Bands