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Roughly five trading sessions after an initial negative reaction to the Standard & Poor’s downgrade of the U.S. debt outlook, the broad market is printing fresh 52-week highs. Breakout plays are working well, as the bears are once again at the epicenter of seemingly every practice joke that Mr. Market is playing. As you can see on the daily chart of the Nasdaq Composite Index above, so long as the bulls can hold this key 2800 level breakout, we are looking at an inverted head and shoulders patten that yields a measured move upside price objective of roughly 3000. Note that the S&P 500 also has a similar setup with a measured move target of roughly 1400.
The Nasdaq also clearly illustrates the huge gap higher that we saw last week off of the lower end of the range. Recall that “common gaps” get filled, whereas breakaway or runaway gaps do not. Again, so long as the bulls hold 2800 here, that gap will prove to be a breakaway, which of course would very bullish.
While all eyes will be on Bernanke tomorrow, I will continue to focus not just on the levels outlined above, but also on the best individual stocks that are working in an increasingly evident stock picker’s market.
I must say your call on the S&P to plow thru 1340 was B-E-A-U-tiful. There is something to brag about. Just hope the Bearded one sees forth to extend free money.
Thank you, sir.
Chess, the finnies aren’t cooperating. BAC looks like a BF forming and set to roll over…again. Bought some Jun 13puts .. This ones been good to me.
Very curious to see how it will play out. I’ve been looking for them to catch up, but no dice so far.