U.S. Stock Market Foreshadows Another Rally

NEW YORK ( TheGoldAndOilGuy.com) -- Over the past couple of weeks investors and traders have been growing increasingly bearish on the U.S. stock market. While I also feel this rally is getting long in the tooth, there is no reason to exit long positions and start shorting.

My followers know I do not pick tops and I do not pick bottoms. There are more cons to that tactic and on several different levels (timing, volatility, emotions, lack of experience, addiction) than there are pros.

Keeping things simple, short and to the point here is my thinking for today and this week on the broad market. Remember, my analysis is 100% technically based using price, volume, cycles, volatility, momentum and sentiment. I try not to let any emotions, gut feel or bias flow into my projections. I say "try" because I am only human and at times when the market and emotions are flying high they still take control of me. (However, those times are few and far between.)

So let's get to the charts.

S&P 500 Index Trading Daily Chart -- SPY Exchange-Traded Fund

The S&P 500 index continues to hold up within its rising trend channel and the recent pullback is bullish. Remember, the trend is your friend and it can continue for very long periods of times ranging from days, weeks, and even months.

The U.S. Stock Market "Muscle" Indexes

The charts below show and explain my thinking. In short, we need these two indexes to be strong if we want to see another major leg higher in the SPDR S&P 500 ( SPY), or to at least test the recent highs.

Tuesday, the market opened slightly higher and pushed up in the first 30 minutes with strong volume. Overall the market looks as though it needs a day to pause/pullback before taking another run higher.

Small-cap stocks are the ultimate risk-on play and generate ridiculous gains in very short periods of time. I focus on these with my trading partner exclusively at ActiveTradingPartners.com where we have been making a killing on trades such as NUGT Up 21% in 1 Day, and IOC Up 11% in 2 Days.

Bullish Index Price, Volume and Candles

The S&P 500 has been very predictable the past couple of weeks for both intraday trading during key reversal times in the market when price has pullback to a support zone, and also for swing trading. Last week we and followers bought the ProShares Ultra S&P500 ( SSO) exchange-traded fund when the market pulled back and we exited the next day for a 3.5% profit.

Yesterday was a perfect intraday example, with the S&P 500 bottoming out at my 11:30 a.m. reversal time zone with price trading at support. The price then rallied into the close posting a 12-point gain on the S&P 500 futures for a simple momentum play pocketing $600.

U.S. Stock Market Mid-Week Conclusion:

In short, I still like stocks as the place to be and will not get bearish until proven wrong. Once price reverses and the technical clearly paint a bearish picture with price, volume, momentum, cycles and sentiment will I start shorting the bounces.

This week is a pivotal one for the stock market so expect increased volatility and possibly lower lows until the counter-trend flushes the weak positions out before moving higher.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Chris Vermeulen is founder of the popular trading sites www.thegoldandoilguy.com and www.ActiveTradingPartners.com. There he shares his highly successful, low-risk trading method. Since 2001, Chris has been a leader in teaching others to skillfully trade in gold, silver, oil and stocks in both bull and bear markets.

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