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Friday, June 15, 2012

Daily update

The market rallied today in the face of poor economic data and Greek elections this weekend.  I heard many people on TV all week talking about the FED doing more quantitative easing next week.  I believe this is the reason why people are buying.  The poor economic data only strengthened their belief and they bought more.  I think this optimism is unfounded, but we will find out next week.  Here is the daily chart.

I have marked an inverted head and shoulders pattern that many people are talking about.  We broke through the neck line today.  This is such a sloppy pattern I am not sure it is really valid.  The measured move from a legitimate pattern would be a 1400 target.  Notice how the neck line break out brings us right up into the major resistance area I have had marked out for weeks.  The bottom pattern is very sloppy while the overhead resistance pattern is very clear.  Which will end up winning out?  The 100 SMA coincides with the upper resistance line.  I suspect that will make that area even stiffer resistance.  The 50 DMA is right about in the middle of the lines and may be a place where some sellers are lurking.  I am sure this first test up into resistance will be met with some selling at some point soon.  The question is do we get far enough up that a pullback to the neck line will hold.  I think closing back below that neck line would likely set up a retest of the June low.  The volume was extremely light today for a quarterly expiration.  I just don't see anything in the volume pattern that gives me any confidence that this price formation is really a bottom. 

Next week there is a lot of things going on that could cause some high volatility.  I have no idea what, if anything, will happen based on the Greek elections this weekend.   Here is a look at the 130 min. SPX chart.

We have enough price action now to place a decent looking lower trend line for this up move.  I like to show the SPY chart on this time frame because it has useful volume information, but the ex dividend today distorted the chart.  It will take a while before we get past that.  Notice we ended with blue price bars so we are outside the upper bollinger band.  We moved up into resistance with short term extended price.  That will often lead to a pullback early the next trading day.  As long as we stay above the blue trend line it is buy the dip mode.


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