Mike Paulenoff, author of MPTrader.com, examines the direction of the S&P 500 by looking at its e-mini futures contract, which trades nearly around the clock:
Sunday night's surge in the S&P 500 e-mini futures in response to the news about the new Treasury Plan reversed Friday's terrible close and propelled prices in the chart above key near-term resistance at 800, into the 820 area, likely on the way to the 835-845 target zone derived from the head-and-shoulder base formation.
Another potential near-term target is 855-60, which represents the resistance line of the down-channel from the Election Day high at 1004.75. At this juncture only a decline that breaks 806 will trigger initial signals that the upmove is exhausted. More significant is the 801.50 to 800.00 support plateau, which if violated and sustained will put in a near-term top and project lower prices that should revisit the up-trendline from mid-March, which cuts across the price axis today in the 776-778 area.
Barring a decline beneath 800.00, I will consider the weakness off of the high as a correction prior to yet another attempted upmove that will point to 835-845 next.
Harry Boxer, author of TheTechTrader.com, selected Direxion Financial Bull 3x Shares (FAS) Monday after the close as his Chart of the Day. Harry describes the technical outlook for this stock:
The Direxion Financial Bull 3x Shares (FAS) is motoring with the big news from the bank sector and Tim Geitner. But technically the stock ran into resistance last Thursday at the Jan-Feb lows and backed off, did a slight retracement, and then snapped back on Monday in a breakaway gap, moving 2.07 on 292 million shares traded. If we get a follow-through, and that's still in doubt, and we break through the 8.05 area, the stock has got a good shot at moving up towards the 9 ¼-9.40 zone. That represents the declining tops line and declining 21-day moving averages, and would be somewhat near the top of the channel, although that channel can extend as high as even the 11-11 ½ zone, which is the secondary overhead resistance.
So let's call the targets, if we get through the 8.05-8.15 zone, at around the 9.25 and then something like 11-11 ½ potentially.
See Harry's Chart of the Day Video Analysis on FAS.
Jack Steiman, author of SwingTradeOnline.com, thinks the rally has further to go:
The key in Monday's rally was not just the points gained but the fact that the S&P 500 also took out its weekly trend line off a bullish falling wedge which had those massive positive divergences in place. All the indexes easily blew through both their 50-day exponential and simple moving averages. The move through was powerful. To me it's far more relevant that we took out that weekly falling wedge trend line as that fact is a real change of character for this market and represents a very bullish scenario for this market for the short term at least. We also took out the trend line on the daily chart and you can see that tonight in our first chart. The rest of the charts speak for themselves. The break out of these falling wedges put the bears completely on the defensive as they know the bulls will get a lot braver on pullbacks from oversold. They will defend those trend line breakouts that haven't existed for a very long time indeed, No longer will the work be simple for the bears.
Even the Ultra Financials ProShares ETF (UYG) broke and closed above its 50 day simple moving average. It still has 3.19 to clear to get through the 50 day exponential moving average but it's off to a good start.
When markets are moving you are always looking for a change in character. Something that comes along and says we need to take pause and notice this unusual occurrence. That's the key to understanding the importance of what took place today on that daily and weekly chart on the Sp. The breakout above those critical trend lines through positive divergences is a real change of character for sure. Not seen in over a year. It tells us the bulls are more in control of this market than the bears and how long has it been since we could say that! It tells us a true shift is in place but what it doesn't tell us is how long this will last. We don't have to know that. What we need to do is study the change that took place and stay with that message until another change takes place. It's really as simple as that. Stick with the new message and use it to our advantage as time moves along. Yes, we will reach an end to what we're going through but why worry about it or waste any time trying to figure out the end of it all. Just go with the flow and make good decisions when weakness allows for an entry.
Gary Dean, author of MarketsPath.com , agrees, as he sees the rally in its beginning stages:
The lows that were set at SPX 666 should be in place as we scratch out a large multi week/month 5-wave move higher to my 1050/1100 target. We should be in the late stages of completing Wave 1, so the move higher is still in its beginning stages, believe it or not.
The target zones I am watching for the Wave 1 to run its course wouldbe 826/833/839. I believe they will whip saw the tape before theyactually finish the Wave 1 down. Many shorts will be watching the gapat 826 as the top and if they take that out, we may see a quick shortcovering move to the 839 pivot. But a head fake down from the 826 pivotto the 805 area should be expected. If the 805 level holds, that iswhen the last leg up to 839 would hit and should complete Wave 1.
