After finding a bottom at 1972 on Tuesday, SPX rocketed up on Wednesday and Thursday punching through its old Primary Downtrend Line (PDL, dashed black line) and Dynamic Trend Line (DTL, 13 D-EMA, thick red). The rally continued on Friday as SPX got very close to take out its all time high before closing nine points below it.
The 5% gain in SPX in three days was due to massive short covering and also massive buying by traders, myself included, who did not get in
when SPX bottomed out at 1820 on October 15. Those traders were forced to sit out as SPX rallied from 1820 to 2079 without any correction. When SPX bottomed out on Tuesday, everyone who wanted to be
long, got in thinking that SPX would shoot up again like it did before from its October low to its recent all time high earlier this month.
Chances are good that SPX moves higher in a more normal bull leg
pattern this time around. There will be ample opportunities to add to
long positions along the way because there will be normal profit taking pull backs. There is a good chance that one of those pull backs is coming our way soon. I expect SPX to top around 2100 sometime this year. Then early next year, during the first few trading days, starts to sell off to back test its DTL
and possibly its 50 D-SMA around 2030 to 2020.
Per my plan, I did my first buy of four last Wednesday. I'm planning to go back into cash as SPX hits 2100 and then buy long again as SPX corrects very early next year to back test its DTL and 50 D-SMA.
Seasons Greetings and Happy New Year
Disclaimer:
The
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provided for
information
purposes
only
and
should
not
be
construed in
any way
as
investment
advice
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recommendation.
Furthermore,
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expressed
may
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