This week’s impressive stock market gains have helped calm those remaining market bulls as in Tuesday trading both crude oil and stock traders were covering their short positions. Crude oil’s positive money flow resulted in a massive rally that took the futures quickly back to their monthly projected pivot resistance. The 56,000 drop in open interest supports interpretation that it was mainly a short squeeze.
All the major averages showed nice gains with the small-cap Russell 2000 up 1.83% and the Dow gained 1.76%. Both did better than the S&P 500 and Nasdaq 100, which were up 1.44% and 0.97%, respectively. The market internals were strong with advancing stocks leading the decliners by almost a 4-1 margin.
In last week’s analysis of the monthly charts and technical studies, the focus was on the long-term market trend. The conclusion was that there were no signs of a change in the major trend despite the mixed signals from the other time frames.
The key question for both investors and traders is whether the market now shows enough strength to break the major averages out of their two-month trading ranges. Though it is likely to be the weekly close that will tell us more, a look at the current technical readings will tell us where we stand now.
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