This last week of upside trading was a total blow out to the upside. It was almost as if ‘they’ had a plan of operation… like a scorched earth type of plan, not giving the other side a chance to get out.
There is a candlestick pattern known as ‘three white soldiers’ which is essentially a bullish signal because you have 3 successive long white bullish candlesticks in a row and it tends to be a sign that a new crowd is taking hold of the tape. But looking at the tape I see not 3 but 5 of them. So I can only assume it is giving the same signal.
Now comes the question whether July 5th will be a down day or not since 5 up days in a row is rare enough as it is.
I would say that odds suggest that it will be a down day (or at least some type of consolidation hammer day) because today we hit and stopped right at the previous ‘shoulder’ of the 2/18/2011 high. It looks like a natural resistance point.
In addition 1346.50 on the sp500 is where we hit a 78.6% Fibonnacci retracement level of the decline from the 5/2/2011 swing high. So we have a Fibo resistance level combined with the 2/18/2011 price resistance level… sure does make for a possible congestion area or sell off zone for the market early next week. But then I could say forget about Fibo levels and resistance levels, it is the day after the 4th of July! This market can do 5 straight up days, so why not a sixth?
We shall see.. but Tuesday is likely to be a low volume type day I would think so I expect some type of retracement that develops into Wednesday or Thursday and then maybe an A B C up type rally after that.
Going back to the super long term quarterly candlestick chart I can say with a reasonable degree of confidence that if the sp500 is able to achieve and exceed 1368 during the July Quarter OR able to achieve and exceed 1364 during the October 2011 quarter, then we can consider the sp500 as having successfully accomplished a 10 year channel upside breakout. Achieve, exceed AND hold the levels I just indicated above in the respective quarters… that is what is on deck for the sp500 in my opinion.
Assuming the market successfully moves into the green shaded area during end of 2011, then the next great shorting opportunity on a possible longer term basis would come in near 1600 which is the point at which the tops of the year 2000 and year 2007 connect creating a massive topside resistance band.
But for now that is still too much to chew on. In the near term the issue is whether the market can muster a topside breakout from this mega bear channel this year. I think it will, but I need to see it with my own eyes…