FOMC Stumbles, Market Soars

Equities rallied strong on Thursday with overall gains of about 2% for the session. After today's gains, the general market indices were able to reclaim key moving averages and truly frighten some of the bears who were late to the party.

Thursday's gains have led prices to form the right shoulder of 9-day head and shoulders bottom, and it is virtually near completion. The pattern carries a price target of 1100 based on measuring rules. This price target also corresponds with the exact level of the two prior intermediate highs so it is a critical resistance to watch. I have highlighted this pattern with 15-minute and 60-minute charts. In the short term, it looks like we will continue to see higher prices, however the intermediate trend is still tilted towards consolidation/sideways price action.

The above charts focus strictly on price action, volume has been left out, unlike the daily charts I frequently post which always have volume. On the S&P 500 daily chart, we can see four straight days of gains, on four days of declining volume. This is a warning sign that should not be ignored, although prices seem to point to higher levels. Action on the S&P 500 and NASDAQ should be watched very carefully if prices reach the range of the September "shoulder". These levels are 1075-1080 on the S&P and 2150 on the NASDAQ.

Last up is the daily VIX chart featured on our Market Internals page. I have highlighted each of the major peaks in the VIX, and how they correspond with key market bottoms. Note the recent peak at 30 and sharp turn lower as prices have started to trend higher.

As always, the long term trend. You can also Follow us on Twitter or Facebook, and sign up for our Portfolio Tilt updates by e-mail , delivered every morning.

 |  |