Triangle Break: Yesterday the market rallied and SPY broke through its Triangle pattern. The break of the pattern is considered to be a bullish break and a continuation of the uptrend. SPY was not able to get above 137.48 which represents the resistance level from the last highs from early July so this level needs to be broken before more upside can be allowed. Past this SPY resistance is at 137.86, which as of this morning SPY is trading at this level. It is very possible to see SPY advance even higher now that is has broken out of its triangle and the July highs. If it can get above 137.86 there is a good possibility that the highs for the year could be tested. Any continuation of the rally since the June lows depends on SPY staying above 135.89.
Support: 136.90, 136.27, 135.89(First Real Key Support), 134.85(Major Support)
Resistance: 137.86(Big resistance level), 139.12, 140.46, 141.87
The Dollar: The dollar has been selling off since hitting its highs last week but had not being able to stay above its resistance at 83.67. We noted that below 83.09 is bearish for the dollar and bullish for the market, which seems to be correct. Right now the Dollar or DX is at a short-term support level at 82.88 again below this is bullish for the market.
Oil Break Out: The selling off of the dollar has helped oil get back above 90. Oil broke out of its resistance at 87.82 yesterday and its now trading north of 91. The next closest resistance is not to far off at 92-9.20. If Oil continues to rally it should help push the market higher
Funny Things: Once again bonds did not sell off with the market it was only later in the day that they did. TLT was actually green for the day, closing .05% higher while not a big up day it is still odd that we have not had a sell off in bond even as the market has rallied off its lows. Financials did not rally either XLF was down for the day with individual companies down like GS, BAC and MS down over 1%. One would want to financials pushing the market higher or following the trend.
Overall: This rally is being led by an oil breakout, a weak dollar and ag stocks fine sectors to lead a rally. The break of the triangle today came with weak volume which is suspect for a continuation of the rally but the breakout should be respected. If this breakout is to last it will need to get above 137.86 but without selling in bonds and rallying of financials it might be hard for this market to do. The trend is up so bullish plays are right but be wary if the market cannot get higher in the next few days.