Wednesday, statistically, was said to be the worst performing day of the month, in the worst performing month of the year, for the stock market. What happened? Both the S&P 500 and the Nasdaq 100 rose over 1% and the NASDAQ closed at a new all-time record high. Just like in sports, this is why you play the game on the field. So now that everyone, even President Obama, is breathing a sigh of relief what happens now?
The chart of the S&P 500 below gives some clues. Following the price action, the index broke over long term resistance in July and moved to a new high. Falling just shy of 2200 it then started to pull back.
The pullback retested the break out zone and held. And now it is moving back higher. This broadly created a break of an expanding wedge pattern. The retest, hold and reverse gives solid confirmation of the break out. And now it has a target to the upside over 2400. Yes I wrote that with a straight face.
The S&P 500 will not move there in a straight line, of course. And it never has to get there. The thing is that the price action is showing strength and movement to the upside. Momentum confirms this with the RSI moving back over the mid line as it rises. The MACD has stopped falling and a reversal would add weight to the case for more upside in the S&P 500.
The next major resistance test will come at the prior high, near 2190. Above that level sets a next step to 2390 then 2400. The price and indicators are lining up for more upside in the S&P 500.
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