Over the past couple of weeks I’ve seen a lot of blog posts and Twitter charts highlighting the bull flag on a S&P 500 Index (SPX) daily chart. This week the bull flag was broken to the upside. The flag itself is important, but is made more important by the notice of a lot of market participants. Remember, what makes technical analysis a powerful tool isn’t just the patterns themselves… it’s the number of people and the amount of money that act on the pattern.
The chart I’ve been watching and believe is more significant is the weekly bull flag on SPX. Of course, no one is talking about it so it’s probably irrelevant. 😉 Anyway, what I’m seeing on this chart is a nice clean break above the weekly bull flag and then a successful retest of the upper trend line.
This last chart is probably the most important. It represents price targets tweeted by traders for SPX. Most people are tweeting 2100 and 2110-2115. That doesn’t represent a lot of hope (only 15 points). Notice there are no tweets calling for the all time highs near 2135. This tells me that it will likely take a move above 2135 before there is widespread acceptance of the rally. You can see weekly updates the chart at the Trade Followers blog.
The market is set up for a bullish run, but a lack of traders expecting a move to the all time highs indicates some chop ahead. I suspect that SPX will need to break out to all time highs before we start seeing hope for substantially higher prices.