Feb 242012

This last week saw an attempt by the bears to push the markets lower, but it was staved off by some good reports that continue to suggest an improving economy.  So, following a probe lower into Wednesday afternoon, we header higher again.

Ranges have been narrow and intraday trading has been difficult for those trying to hop on an intraday trend.  Even intraday counter trending is difficult as in both cases, when the market gets like this, the intraday risk profile exceeds likely gains- so, the market gets quiet, which is exactly what happens in a real bull market.

Another thing I am noting on my monthly S&P futures chart is an expanding cycle inside the monthly retracements. This type of pattern is bullish.  To clarify this picture, what I really mean by this is the last high we are taking out right now was 10 months ago. The one before this was 7.  This makes the cycle longer, which is characteristic of a bull market as well.   Last week I noticed my monthly data was posting incorrectly, so I gave a bad projection number on this monthly chart- What I am seeing now, is potential into the  1430 area on the futures contract. This corresponds to a level of just under 143 on the SPY.

It looks like as we push higher on the weekly chart, however, we are pushing beyond the 1364.75 area which denotes a bit of an over bought condition. However, retracements have been shallow, so we may just have the potential energy to head higher.

Last week we saw twice as many earnings upgrades as downgrades and as I write, I am seeing 283 new highs today with only 24 new lows.

What does concern me however is volume.  We are about 4.5% higher so far this month, and only 4 out of 17 days have had above average volume. So there is a seeming absence of conviction driving this rally higher.

But I'd use caution buying too big an initial allocation at these levels.  If you are already long- Just keep it tight and enjoy the ride if we get going higher.

Looking at range, I am seeing a grand whopping 19 point range this week. Contrast that with a 10 week average range of 31 and it reiterates my earlier point.  Comparing to the 40 week range figure of 55 points, we have really calmed down a lot.  In fact, the 2 week historical volatility is only 17% of the 20 week; a condition associated with an increase in ranges and down trending. It has been said, there is calm before the storm.

On the support and resistance front,  I am seeing a potential for resistance at around the 1378 area.  Support around 1359-1361.  At or around a new high like we have right now, a resistance is a projection more than from a profile analysis, and so is less reliable.

As it stands right now, I will likely a buyer in a day timeframe at the 1359-1361 area next week if we do not see discouraging reports.

Be sure to also watch my twitter feed, or tweets on the site's right margin for intraday support and resistance levels during the week.

That's all for now :-)




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