During the past week both bears and bulls felt like winners, but on July 3rd and on Friday the 5th, became the trend setters by both confirming support and by breaking resistance levels. Both DOW and S&P not only managed during this week to confirm their support levels but also managed to stage an upward move by making higher highs and higher lows. Short term trend is again bullish and we believe that at least a double top to the all time highs will be achieved. This was our first and most probable scenario from 1585 in SPX and 14700 is DOW.
SPX staged a shallow sideways corrective move after the completion of 5 waves up from 1560. Friday was the day that the support and pivot point at 1615 was back tested and prices continued higher in an pattern. All the evidence to support this bullish trend are there. Higher highs and higher lows in most time frames. SPX tested both 1600 on Wednesday and 1615 on Friday. Support levels were held, despite efforts by the to push below critical support. Even on Friday, prices retraced 50% of the last upward impulsive move from 1604 to 1627, and then broke upwards impulsively making new highs.
Since the index bounced from 1560, there was no instance where an important support was broken. Even the first pull back down did not even reach the 38% retracement. The sideways movement showed signs of an upward break out above 1620. The pull back put us into thinking that wave C down was going to test at least 1590, but even the 1600 support was held. Bulls are now in control and unless bears make a dynamic comeback near 1650-60, we expect prices to continue higher and why not see the 1700 price level.
Concluding we remain bullish with targets at least a double top and most probably a new high at 1700. For this scenario to remain valid, support at 1615 must hold. If this level is broken with the current price formation (3 waves up), there will be increased chances that the correction from 1687 is not over and we are heading to 1560 again. As always, it is important to review not only which support and resistance levels are held or broken, but it is of similar importance to review the price pattern the Index has.
As always, thank you for taking the time to catch up on my thinking.
A term used to describe a trader who is expects that a particular asset – be it a commodity, currency or product – to rise in value. The opposite of a ‘bear’.
The idea is that bulls attack by bending their heads and poking their opponents upwards with their horns, symbolising the fact that they are buyers, driving prices up.
Beliefs held by the aforementioned ‘bulls’ of the trading world, are described as bullish. Characterised by a generally optimistic outlook on the state of a given asset, a bullish outlook would suggest that a rise in value is imminent. Opposite of bearish.
A term used to describe a trader (bear) who is expects that a particular asset – be it a commodity, currency or product – to fall in value. The opposite of a ‘bull’.
The idea is that bears attack by getting up on their hind legs and striking their opponents down with their paws, symbolising the fact that they are sellers driving prices down.
Beliefs held by the aforementioned ‘bears’ of the trading world, are described as bearish. Characterised by a generally pessimistic outlook on the state of a given asset, a bearish outlook would suggest that a fall in value is imminent. Opposite of bullish.