sp500 Breaks into Bullish PowerZone Today

Today the sp500 broke northward into the ‘bullish powerzone’ also known as the trading area that exists above the 70 level RSI line.  The sell off at end of day prevented a substantial move above the 70 line, but the final RSI value by the close was 70.29.  So it is slightly above it.

Now that we are in the powerzone I am expecting upward trend persistence with occasional sell offs that help to push RSI lower again to the 70 line, before bouncing up again.  Of course this is just some early speculation at this point.  The price action as a leading indicator will also provide important clues.

I am starting to think that it will not be worth it to issue a BOT short signal when and if the sp500 tags the April 2010 swing high.  Instead I may switch to BOT neutral signal if and when we tag the April 2010 swing highs and then see how deep or how shallow the market is able to retrace.  Thereafter I will likely re activate the BOT Long Signal.

It just does not seem worth it to issue a BOT Short Index Trading Signal when it may only deliver a 1 or 2 day sell off.  I would rather maintain a neutral stance and then look for a re entry assuming the market behaves itself.  This is my thinking for now, but I may completely change tack depending on market conditions.

I am still expecting a possibly enormous upside move if the market is able to break north of the April 2010 swing highs.  That upside move may disguise itself in the form of a slow motion breakout that takes a whole month however.  Ironically (or perhaps not so ironically) the beginning of this upside move may coincide with the November elections and perhaps a return to gridlock in Washington.  If the republicans sweep or if the elections results in a 50/50 balance again (gridlock) my speculation is that the market could shoot up 300 points on that day.

There is still the lingering concern about the lackluster upside volume on the current advance.  Whether or not that situation can change upon a northward breakout remains to be seen.  If you want to see what a normal, healthy and strong price advance looks like then just pull up a chart of the SLV silver ETF.  It is an expanding upside trend with a very healthy upside volume expansion.  The SPY chart looks completely different and much weaker if we rate it just on volume.

This could be a sign that eventually the advance in the broad market averages will burn itself out and maybe just linger sideways sometime next year (just a long shot theory for now).

Posted in Index Trading, Online Trading, SP500
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