Update - Stock Indices Remain in Bullish Technical Patterns
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This is an update for my commentary from April 25th, which was entitled: Stock Indices Remain in Bullish Technical Patterns. I'll continue to play the contrarian role since many appear to have written off further stock market gains. Actually, I'm not blindly bullish; but similar to April's conditions, stocks do indeed remain in bullish technical chart patterns. As I stated back then, textbook chart patterns are very clearly defined; and rather than entertaining divergences that seem to continue failing, or macro fundamentals that are certainly askew but may not govern market movement anytime soon, I suggest keeping it simple with a watchful eye on these patterns. Although headwinds still remain in place for U.S. equities, they continue to grind higher in these well-defined technical patterns.
The first chart is a daily bar of the S&P 500 Index. Support at the minor-minor trend channel (e.g. aqua blue) recently held yet again as the market trends higher in bullish trend channels of varying degree. The market's previous all-time high is the horizontal white line. Major resistance is present at the major trend channel resistance line (e.g. bold red), which comes into play in the low 1700s.
The second chart is an update of the Dow Jones Transportations Average Index's weekly bar chart. The enormous textbook inverted head-and-shoulders pattern remains in play, along with its tremendously bullish implications. The clearly defined bullish trend channel is highlighted by the parallel aqua blue trend lines.
The final chart is a weekly bar of the Russell 2000 Index. The bullish trend channel (e.g. in red) is again clearly defined, and the previous all-time high in white has been left behind.
In conclusion, U.S. equity indices continue to remain in bullish technical chart patterns. I believe these patterns should be respected. I also am aware of the macro-economic headwinds present, but I personally will not entertain a strong bearish conviction until failures of the patterns I have showcased present themselves.
Chief Investment Strategist
Preferred Planning Concepts, LLC
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Des Plaines, IL 60018
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