We reviewed the closely followed S&P 500 Index on Nov. 20 for Real Money, and I wrote that, "If you kept your powder dry then you have some funds to put to work in the market. This is not a buy that will see prices rally to new heights but it should be a respectable year-end rally. 2019 will see the bear return."
With the S&P trading much higher Monday morning there is keen interest for an update. If you put money to work before Thanksgiving you are in the driver's seat.
Let's look at a couple of charts to see if our strategy should be adjusted.
In the daily bar chart of the S&P 500 stock index, below, we have a number of clues and signals. Prices made a low in October and a retest in November. Prices are set to test the highs of the pattern or base pattern -- see the horizontal line. A close above the line would be a clear breakout and yield an upside price target around 3,000 -- the height of the pattern projected upward from the breakout.
Price momentum (lower panel) has turned up and the 20-day and 50-day averages are moving toward a bullish crossover.
In this line chart of the NYSE Cumulative Advance/Decline data we can see a bottom reversal and positive momentum. The a/d line is ready to break out of its pattern just ahead of the price chart (above).
In this Point and Figure chart of the S&P 500, below, we can see a downside price target of 2,408 but a rally to 2,841.64 will be a double-top breakout and should prompt a bullish price target.
Bottom-line strategy: A week or so ago there was panic in the street and some traders thought Chicken Little had replaced Tom Turkey. Now that prices are surprising traders on the upside we can carry up on the charts until the champagne goes flat.