I was pretty pessimistic yesterday going into today. The sell-off at the end of yesterday, and economic and global news most likely was not going to be good, and it wasn't. Jobless claims rose 6000 from 380,000 to 386,000. The prospect that Greece could still leave the Eurozone this weekend is 50/50, and Italian bond yields climbed. How did the market react? It climbed.
What's fueling the climb is optimism? Central banks are coordinating their actions in order to dampen the affect, IF Greece leaves the Eurozone. The Fed specifically may opt to extend Operation Twist that began last fall when the meet next week for the FOMC (Federal Open Market Committee) By coordinating efforts central banks, in the view of investors and traders, will be able to stem the tide with a bad Greek outcome.
The SPY ETF is also very bullish based on the patterns and some of the support levels it has been able to establish the last couple of days. The 60 minute gives a very good picture of that optimism.
1. We created a higher low when the SPY found support at $131.50 today on the open.
2. The head and shoulders pattern. This pattern is a highly reliable pattern in most time frames.
3. It pushed above resistance and the 200 period moving average on strong volume today. The previous moves involve gaping and then exhaustion into resistance. This move was a steady move up on volume at the end of the day.
4. The last 3 days the the trend has found support at the 50 period moving average.
With the optimistic atmosphere and how the chart patterns are shaping up there could be a break out above $134 tomorrow. The focus is on Greece, and the U.S. economic reports that come out tomorrow may not have much of an impact even if they are negative, but be nimble, things can change quickly so be ready if change comes.