I’ll be putting together a detailed review of the significant price action thus far in the week tonight. What is important to note thus far in the session is that the S&P has pushed through four resistance levels (three minor, one major) in one push. This is typically indicative of a move that is A) either just beginning or B) in the process of blowing off to the upside. In this case, I think the answer here is A.
It doesn’t come without challenges, however. You cannot simply buy into the market here and expect vast profits into year-end as Santa (aided by the Fed) bestows vast riches. A range bound period over the next week targeting 1210-1240 on the S&P wouldn’t at all be unusual and would, in fact, be a positive for the bulls. It will have the looks of an imminent top. Judging by spectator skepticism in this market, it will also be shorted or liquidated into, giving the market firepower needed for a convincing push above 1250.
The wildcard is that we are about to enter a period of choppy price action similar to August-October time period where this type of move is retraced in the days ahead. I think that this is a distant possibility, however. Nevertheless it should be in the back of a traders mind as a plausible scenario.
Of concern is primarily the action in the Euro, which I would have expected to be a lot more convincing today. The major European indices look to be carving out a substantial bottom, however. That is in direct contrast to a European news flow that has not just been persistently gloomy, but apocalyptic. This type of divergence in news flow and price action is typical of substantial bottoms and in fact, essential to their formation.