As I said in my early Friday post, the indicators are there that suggest a sustained rally in the S&P for the foreseeable future. The 3 wave corrective drops the past few days combined with the recent 5 wave rally that failed to make a new high suggest this market wants to go higher. It may tumble modestly in the near future to correct the 5 wave advance, but 1086 should hold. If 1086 is broken, then the 5 wave count is invalidated and we can flip back to the bearish outlook again. The impacts of the larger bearish view remain uncertain until we see how far this rally can go.
Two things to note:
1) A lot of the market action Thursday and Friday can be chalked up to end of month jossling of positions by fund managers. The first few days of March should bring similar jossling and perhaps may be the final legs of this short term rally phase we appear to be in.
2) The VIX declined to a new low and is at dangerously complacent levels in my view, yet the S&P did not make a new high in conjunction with the VIX's new low. So people are much more optimistic and don't feel the need to protect themselves as much as they did the last time we were near current levels. This optimism is a contrarian indicator and may signal a short term sell off. With 5 waves up possibly completed Friday, this VIX vs. S&P action may signal short term weakness in the S&P early next week. But staying above 1086 keeps the short term bullish view intact.
SPY Volume
The above daily chart is of the SPY (S&P ETF) with volume posted at the bottom. Notice the big bullish reversal candle on high volume that formed a major floor in the downtrend and lead to the current rise we've been in the past few weeks. Also notice that during the rally we've had a couple big volume spikes on up-days which has led to further rallying in the short term. Well although you can't see it on the SPY chart because it opened lower than the S&P did, the S&P made another bullish reversal candle on solid volume (click here for past chart of S&P with bullish candle). So with the 5 wave advance combined with a bullish candlestick and high volume, the evidence is strong that 1086 will hold and this market is headed higher.
GBP/USD
No change in the GBP/USD short trade. I exited half my position at a 175 pip profit and now my stop loss on the other half has been lowered to 1.5333 to lock in a 57 pip profit for now.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.
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