An August Beginning

chessNwine Mon Aug 2, 2010 5:02pm EST 3 Comments

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MARKET WRAP UP 08/02/10

The bulls came out running with a purpose today, as the broad indices printed big, green marubozu candles to start the month in style. With the S&P 500 closing up 2.20% to 1125, the four indecisive days down last week appear to have been a bullish consolidation pattern. Perhaps what was most encouraging for the bulls today was the lack of aggressive profit taking after the morning gap up. Ever since late April, just when it seemed like we had a breakout in the making, the bulls would quickly head for the exits, and the bears would storm in ready to send us down to the lower end of our trading range. Today, we saw none of that price action as the gains held on throughout the day, and we actually closed right near the highs.

As bullish as today seemed, the S&P still has to contend with the 1131 price level, which is precisely where we touched and reversed on June 21st of this year, sending us straight down to 1010. Perhaps I am being overly cautious, but I believe that we will get some chop around that area, as many of the bulls who were previously trapped there are now made whole. Nonetheless, today was a sound victory for the bulls, and should be treated as such. As I illustrated last evening with my setups, I am seeing far more constructive charts than I have seen in months.

Taking a look at the updated and annotated daily chart of the S&P 500, one can see that the bulls have cleared several key obstacles, in terms of resistance. However, the late June resistance, as well as the 100 day simple moving average, still loom directly above (see below).

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Turning to other key indices and sectors, the Nasdaq Composite, Russell 2000, Dow Jones Transportation Index, as well as the emerging markets ETF all show continued bullish developments on their daily charts, seen below.

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As more charts setup and breakout, I will look to become more aggressive on the long side. To deny the bullish progress made in the charts seen above would be allowing your bearish ideology to blind you from the message of the market. While the late June resistance is still an issue for the S&P 500 and the Nasdaq, we are well on our way to making a series of higher lows and higher highs.

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EQUITIES: 34%