Charting a Possible Bullish Turn

The week has really turned the trend upside down. It's not often we see such a move in relatively short order, but then the market is there to remind us movement is random. The movements tend to push us to "believe" they repeat, but then they refute the trend. Take the move early on Monday, where stocks ran higher, but fell hard to close at multiweek lows. It was that drop to 4140 or so that signaled the buyers to step up and pick things up. Tuesday was a strong surge higher, but there was still some uncertainty with the Fed announcement the following day. That was a wild session, up more than 500 points, losing it all and then finishing at the highs of the session.

Volatility collapsed this week as the uncertainty over Fed policy was removed. No matter the Fed talked about, a heavy dose of tightening policy, the markets were happy to just "know it." That kicked off a slew of buying that lasted into the end of the week. This has been the best week in a couple of years, but what condition are we in for more upside? It might be limited here seeing as we are now at very high overbought levels, prices are at resistance. We could see a sharp pullback within days.

Some good news. I look at some very important breadth figures, specifically the amount of stocks above the 50-day and 200-day moving averages. Those markers have turned positive and are in the bullish camp. Hence, we may see pullbacks bought, something we have not seen in several weeks. The presence of dip buyers could help control the markets to move in a more "trend"-like fashion, with higher highs and higher lows. In addition, Thursday showed new highs starting to expand at a faster pace than new lows. That is also in the bullish camp; there are other indicators that are showing us the possibility of turning even more bullish -- but one day at a time.