|Theory has it that the last few days of December and beginning of January are a high-odds period of rising markets--Something to do with year-end window dressing by mutual funds, a practice none admit to but plenty accuse others of doing.|
|Regardless, when pondering near-term market direction I prefer to defer to the charts. Shall we?|
|Figure 1: Daily Charts: OEX & SPX|
|Graphic provided by: Quote.com.|
|Graphic provided by: QCharts.|
Both S&P Indices, the OEX and SPX, look bullish by chart patterns, each showing a nearly completed bull flag formation. But they're looking bearish by their oscillators. What does such a mixed message suggest? A probable pullback within the patterns at least one more time as both weekly (not shown) and daily charts set up with their oscillators within overbought extreme zones here.
Figure 2: 60/30 Min Chart: SPX
The same thing is happening in their near-term intraday charts: bull flags and nearly overbought stochastic values. We could also connect all of the lows from Dec 19th and come up with neutral wedges as well, but that wouldn't really change the points of action very much.
What next? That remains to be seen, but prices may bounce down near support levels and cause additional buying. From there, prices could pop higher followed by selling, or they could close outside of resistance and establish a new base for price action to work from.
Keeping the chart pattern trendlines in place give us excellent anchor points to buy support and/or sell resistance should either come to fruition in harmony with stochastic value direction.
Fruition? That reminds me... it's time for a trip to the front curb!
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