Yesterday, US indices managed to open near the lows of the recent downward move and break higher forming a double bottom near last Friday’s lows. Both major indices reversed higher breaking short-term resistance levels and continuing higher. We still believe that the downward move remains labeled as a correction and yesterday’s price action was another point to the bullish scenario. What needs to be done now by bulls, is for the intermediate highs made on June 10th to be surpassed.
As shown in today’s charts, both indices made a double bottom and are now trending upwards with enough momentum to break the previous short term highs. Breaking above the short term resistance level of 1649 in SPX and 15300 in DOW, will confirm our view that we are going at least to test the recent all time highs if not make new ones.
We were waiting to see how the market would react near the recent lows in order to determine what we should expect next. The same applies for the resistance levels. What if the indices do not manage to make a new high and instead make a double top? This would reinforce the scenario of a bigger downward correction. If prices get rejected near the 1680 (spx) and 15500 (dow) levels, the reversal will be much stronger and steeper that will eventually break last Friday’s lows.
Concluding, we remain cautiously bullish expecting at least a double top. We will see how the markets will react at those levels and the structure of their movement will determine what to expect next. Until then, as long as we hold last Friday’s lows, it is more probable to continue higher towards new highs.
As always, thank you for taking the time to catch up on my thinking.