U.S. Stocks Could Make a Major Breakout Higher, These Charts Show
U.S. stock markets are poised to make a major breakout higher, technical analysis shows. Now is a good time to do a quick review of weekly charts of major indices.
First, let's take a look at the S&P 500I:GSPC :
Chart composed by The Informed Trader, courtesy of Stockcharts
Last week, in the wake of the Brexit vote, the S&P 500 put in a strong hammer off our 50- and 70-day exponential moving averages (EMAs), which we've found tend to catch pullbacks on our weekly charts. After putting in a strong reversal there, the index is making another attempt at the breakout area at the top of the big picture base.
Next, let's turn to the chart of the Wilshire 5000, the broadest index that we track:
Chart composed by The Informed Trader, courtesy of Stockcharts
The Wilshire 5000 is starting to take out the downtrend line off the recent highs and trying to clear our large flag pattern. Some decent economic data the past week in the form of the Chicago PMI, ISM manufacturing and services reports, and Friday's nonfarm payrolls report are giving the bulls some tailwinds.
Next is the chart of the Dow Jones Industrial Average I:DJI :
Chart composed by The Informed Trader, courtesy of Stockcharts
The Dow is making the same action as the S&P 500 and shows a strong run after a test of the important 50- and 70-day EMAs.
Lastly, let's take a look at the PowerShares QQQ Trust (QQQ) - Get Report , which are in a two-year symmetrical triangle pattern. The NasdaqI:IXIC and PowerShares QQQ Trust have lagged some, but here again the QQQ Trust is making a run at the big picture base top or breakout area seen below:
Chart composed by The Informed Trader, courtesy of Stockcharts
Typically, once an index makes a breakout from these bases it tends to run a while and then come back for a test of the breakout area near the base top region to reset overbought shorter-term oscillators. For now, keep tabs on the 2135 level for the S&P 500 and the 18,351 level for the Dow, which are all-time high levels. As we noted last week, the hammers that were established off the 50-day and 70-day EMAs were a positive indication, so let's see what the major indices do at our breakout areas.
This article is commentary by an independent contributor. At the time of publication, the author held shares of the SPDR S&P 500 ETF (SPY).