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An Indicator Alignment for a Strong Rally

|Includes: SPDR S&P 500 Trust ETF (SPY)

There are plenty of good arguments for the next move in stocks being either up or down.  But if the market continues its persistent following of the key leader groups, the next move may not only be up, but a melt up.  For example, the Baltic Dry Index has been giving a pretty faithful 3 month preview of U.S. stocks for awhile now (as I've been blogging about all year): (click to enlarge charts)

The lower chart is the BDI shifted ahead of the Russell in the top chart by three months.  Here we see an amazingly accurate forecaster of the major turning points for the major moves in U.S. stocks.  Jim Cramer discussed the way reliable market indicators change over time on a recent show.  He posited the Baltic as a primary oracle that is emerging to replace others as we enter a world where the investing shots are called more and more by commodity based considerations. Cramer himself has been a reliable market indicator the last couple years, and he says stocks are headed higher. According to the current BDI foreshadow, we seem to be heading into a strong move up.

Then there is the shadowing that stocks have been doing of the stimulus "V" outlined in an interesting article over at safehaven.com by Gary Dorsch "Commodity Super Cycle" Ready To Rumble in 2010:

The PPT (Plunge Protection Team) has rightly or wrongly gained a pretty faithful following in the stock market.  In the above chart, a "V" in housing and employment are shown, but Gary Dorsch also shows several other vital things in a "V" recovery.  So far the $12 trillion fix-it package has moved the NYSE from $7.9 trillion off the March low to about $11.6 trillion presently as the above chart shows - a move of almost $4 trillion.  If the other $8 trillion kicks in, it could cure the lag the Dow is now in on the "V" curve.

Another pied piper beckoning the Dow much higher is the technology stocks.  The QQQQ is phasing strongly ahead of the broad market right now. But there is also the interesting fact that the tech index has closed what Matt Trivisonno calls "the TARP Gap" while the S&P 500 has not - yet. This was September 29, 2008, when the House voted down the TARP and gapped the stock market into oblivion, creating a major technical landmark. Matt's Fibonacci analysis has us on the verge
of emerging from a Fibonacci zone he calls "the Box of Beer" into "the TARP Box":

If you are a Fibonacci fan, you look for a move to one of the levels shown; and Matt points out that closing the gap of the September 29 event happens to coincide with the 24% Fibonacci level, a "fat target" as Matt phrases it.  This is the top line graphed in the TARP Box.  This would be a strong move to a strong technical event level - one that the technology leader group has already made. 

And if you are a fractal analysis fan, the daily Fractal Dimension Index recently shot up to an extremely high reading, indicating an energetic move soon.  You have to suspect the direction to be up.

As with all indicators, past performance is no guarantee of future results.  Please seek the advice of your local soothsayer, etc. And geopolitical developments, such as the Iran situation, can null and void every other analysis.  But there is an interesting alignment of reliable indicators right now pointing to a strong move higher.

Disclosures: none


Disclosure: disclosures: none