Courtesy of John Nyaradi.
Significant break outs in all major U.S. indexes point to possibility of higher prices ahead.
The first few days of the New Year have substantially improved the technical picture for the U.S. stock market as all major indexes have experienced major breakout moves and cleared significant resistance levels.
chart courtesy of www.stockcharts.com
In the chart of the S&P 500 (NYSEARCA:SPY) above, we can see how the index has broken through significant resistance levels in the 1260 range and is solidifying its position above both the 50 and 200 day moving averages. A significant band of resistance lies just ahead at the 1280-1290 level and clearing that range would lead to the likelihood of an uninterrupted advance to last August’s highs.
chart courtesy of www.stockcharts.com
A glance at the point and figure chart shows a “Triple Top Breakout” on January 3rd which is a very powerful move higher. Next resistance is at 1290 which, if cleared, would point to a clear path to 1370. The chart is also well above the blue bullish support line, indicating an uptrend or bull market conditions.
Upside price projection is 1430 based on point and figure methodology.
All other major U.S. stock indexes are in similar configurations.
The Dow Jones Industrial Average (NYSEARCA:DIA) gained 0.17% today and is above both its 50 day and 200 day moving averages.
chart courtesy of www.stockcharts.com
In the chart above you can see how the Dow (NYSEARCA:DIA) has cleared major resistance and is now close to last August’s highs.
Most significantly, the 50 day moving average has just moved above the 200 day moving average, the configuration known as “The Golden Cross,” which typically is a reliable indicator of higher prices ahead.
The Russell 2000 (NYSEARCA:IWM) also printed a triple top break out on January 3rd while the Nasdaq 100 (NYSEARCA:QQQ) did, as well, and also has formed a “golden cross” as of early December.
Bottom line: When broad based strength across all major indexes is evident, generally one can expect higher prices ahead as more buyers sense the “all clear” and return to the market. Europe remains a question and recent advances need to be solidified to move to a higher level of confidence; so far, the early days of 2012 appear to be the beginning days of a broad based rally.
Disclaimer: Wall Street Sector Selector actively trades a wide range of exchange traded funds (ETFs) and positions can change at any time.
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