Charting the Markets: Bulls Got Some Relief in a Hurry

We had recently talked about the pullback that was taking place and whether it would be more seriously than feared.  When stocks are in an uptrend any pullback of size, whether 2-5% is going to fell awful and fill the bulls with doubt.  That is normal, especially when a complacent attitude sets in.  We saw evidence of that complacency in a low volatility index (VIX) for some time.  Eventually that complacency gets washed away with even a short duration sell off.

That appears to be the case this time as well.  Stocks fell hard the prior three weeks on strong turnover as the bears stepped in to take a swipe at those who believed differently.  But a rally off the 14-period McGinley (shown above) creates what is called a bullish morningstar pattern.  This is a three-candle move with a down session, a doji followed by a bullish candle, but we often like to see a fourth candle for confirmation.  That would be coming (if it does) this next week! Hence, a new bullish move could be upon us if confirmed.

As for the chart, the bullish trends continue to improve.  The parabolic SAR (stop and reverse) is still bearish but will turn bullish in a week or two.  Candles are teal (cautiously bullish) but will turn blue next week with a bullish candle.  All looks fine for this trend to establish in the bullish camp.  Higher targets are up near 6,000 on the S&P 500 chart (upper end of the channel).