It was a short trading week, but it ended with a bang. Tuesday and Wednesday were relatively quiet days with a lot of back and forth between the bulls and bears. Then on Thursday and Friday, it was like the bulls were prodded with a hot iron. It was enough prodding to get the S&P 500 up .96% for the week. Below is the daily chart of the S&P 500.
A bull flag is correction or stall of upward price movement. We want to recognize them because they can be the middle of a two-legged move. If we use the flag as a measuring move, we get to a price of approximately 2470 on the S&P 500. Prices could get the target relatively quickly if the bulls continue to show their current enthusiasm. The next target price to the upside after the flag measured move would be approximately 2480, which is the height of the channel in which prices just broke out of.
Market breadth picked up this week with price. The longer-term breadth oscillator looks bullish while the shorter-term breadth indicator is more bearish. The shorter-term indicator is at the levels in which the S&P 1500 stalled three out of the three last times. Look at the chart below:
The market has been so strong that each pull back has not necessarily been a big swing down in price, but a sideways resting in price. If the overbought condition of the oscillator holds true to the last readings, it suggests at least a sideways direction of prices for the next couple to few weeks. There are no major economic reports scheduled for this week.
The long and short-term trend is up. We are arguably in the breakout to tight channel phase of an uptrend on the daily time frame. The next price target is 2470 on the high side and bulls will want to keep price above the 2400 level to show strength.
by Adam Straseske, CMT
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