Global equities are interrupted today, following yesterday's rally, building on the first quarterly profit, the most since 2010. US futures also fell lower earlier today, in the wake of the best quarter since the second quarter of 2009 , the bottom of the worst market crash in 70 years
Several key factors have maintained buoyancy for three consecutive months, including the Fed that disapproved, high profit figures and the hope of a US-China trade agreement. And despite today's silence, we expect the climb to continue, at least for a while.
Although we remained stubbornly bearish after predicting the current rally – in the middle of Christmas Eve – and that this would probably be the last upward correction within a falling mid-term downtrend, we could change our view if the technicals would have been signaled another situation was developing on the SPX. Our red line is the September peak of 2,940.91, at which time we would turn into bulls.
Meanwhile, although we have not yet changed our attitude, we expect the short-term rally to continue and test again at those highs.
Price congestion, with a downward trend from March 19 to March 28, projected that demand was slowly absorbing supply. The sale was probably committed by the longs who enjoyed the jump of 5% during the rally before the take-profit range, from March 8 to March 19.
The positive breakout on Friday – when weekend commitments show confidence – happened when new bulls were looking for extra deliveries at higher prices. The outbreak signals the old bulls who took profits that the rally is going to repeat and pulls them back in. The undecided who now recognize a trend are expected to join.
In technical analysis it is important to see the big picture by weighing the evidence. We are looking for other indicators to support our opinion, or if we are honest enough, we pause. The flag appeared exactly in the uptrend line since the route in December, while a golden cross caused a buy signal.
Our most exciting realization, however, is that the flag target of a conservative 130 points – calculated by measuring the flagpole, the sharp movement prior to the sideways movement – coincides with the September height of 2,940.91, as the last piece a puzzle.
However, we are not yet comfortable enough to upgrade our bearish call. An example is why the Forward / Reject rule results in negative deviations when the width indicator could not create a new high to mirror price. It has also fallen while the price has risen.
Nevertheless, we mainly rely on price promotions and therefore we again offer a buy signal for the short term.
Trading Strategies
Conservative traders have to wait for new highs to show that the short-term upward trend has reversed the previous downward trend in the medium term, and has turned into both an upward trend and in the short and medium term.
Moderate traders can wait for a withdrawal movement to determine the integrity of the pattern or to gain better access.
Aggressive traders can now take a long position or wait for a pullback for better access, based on their risk management.
Trade sample
Registration: 2,820, end of February, beginning of March, opposition to the support.
Stop-Loss: 2,800, psychological round number
Risk: 20
Target: 2,880
Reward: 30
Risk-Reward Ratio: 1: 3
