Stock Market Technical Analysis
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In today's market you cannot hesitate when you see the reversal is here. Thursday's midday third test of the VIX 17.62 level was all the buy signal you will ever get in this era of fast break reversals designed to leave the masses chasing the rally.
Looking at the two lower charts, we are beginning the upward turn of two high quality EMA layups that have the potential to take us well back up into the S&P and NASDAQ midterm channels shown in the upper charts. It's obvious they want to test the August / September highs and the quality of the EMA lift after another couple days of climb should be sufficient to take the S&P and NASDAQ back to those highs.
Helping to push this rally is a bullish day chart On Balance Volume divergence on the SPY. You also can't ignore the staggering amount of short positions that have been placed on the market in the past week anticipating that this may be the one time Team Yellen just can't make the reversal happen. We could see one big short squeeze here. Also to help the bulls case, last week's weekly candles are reversal hammers on the S&P and NASDAQ which typically gives us three to four weekly bars of climb.
Granted, the news backdrop right now is not very positive considering the world economic outlook and the Ebola problem that could easily threaten airline business travel thus hurting the economy. Nonetheless, from the midday Thursday VIX buy signal for stocks, we are continuing to gain upward momentum and have started a short squeeze. If this goes through Monday and into Tuesday the rise should be sufficient to clearly turn the smaller red EMA lines in the two lower charts upward which would bring in investors for three-week swing trades. It looks like Team Yellen pulled the rabbit out of the hat once again.
Trade well my friends