Since August, the market has been in a funk, plunging at the end of July and then range-bound, more or less moving sideways for two months. The top of the range is notated in the chart below by the horizontal magenta line in the daily chart of SPY, the S&P 500 ETF. On Friday, however, we finally got a decisive move out of the range and above the magenta line.
The question on everyone's minds is: does this breakout have staying power?
Activity in Europe is still the wildcard and is pretty much unpredictable so in this post we'll just stick to the the technicals as we see them.
The view from Alert HQ --
For those readers who are new to TradeRadar or who don't remember what this is all about, the data for the following charts is generated from our weekly Alert HQ process. We scan roughly 6200 stocks and ETFs each weekend and gather the statistics presented below. In this first chart below we count the number of stocks above various exponential moving averages and count the number of moving average crossovers, as well. We then plot the results against a weekly chart of the SPDR S&P 500 ETF (SPY).
This chart reinforces the fact that a reversal has taken place and that a breakout is underway. Three weeks ago, after making some pretty extreme lows, this chart showed a very modest turning up of the yellow and magenta lines. In contrast, last week's charts showed strongly accelerating bullish momentum. Now, this week's chart shows the improvement in the number of stocks above their 50-EMA slowing noticeably while the number of stocks whose 20-day EMA are above their 50-day EMA is still increasing solidly.
This suggests a pause in this recent up-trend is very possible. Note also that the absolute levels of the yellow and magenta lines clearly indicate the market is not yet over-bought and that the newly established up-trend has more room to run.
The next chart provides our trending analysis.