Stock Market Break Out!

Yesterday was a huge day for the market! This was all apparently triggered by merger news and better-than-expected retail news.

The Dow industrials soared 2.1%, matching their best percentage gain since Oct. 1, 2003. The S&P 500 bounced 1.9%, the NYSE composite 1.8%. The Nasdaq galloped 1.9%. Volume grew across the board. It climbed 10% on the Nasdaq and 9% on the NYSE compared with Wednesday's levels.


When I posted a couple days ago, I was concerned that the market was not making new highs and that we were looking at a triple top. However, we were also looking at a consolidation that would eventually result in a break out. The trick was figuring out whether it would break out to the upside or the downside...

We've been spared the continued suspense. The market broke out yesterday on higher volume. The SPX broke resistance and has made a new high. What we're looking for today is confirmation, meaning we want to see the bulls exploit this breakout and push the market higher. Right now, the market is flat.

The chart above clearly shows the breakout. You should also note that a green (bullish) MarketClub Trade Triangle appeared. If you're not familiar with these indicators, understand that you would not trade each time a triangle appears on a daily chart. Rather, the recommended method involves using longer time frames (i.e., weekly and monthly charts) to identify the longer term trend and then use shorter term charts for entry signals. Yesterday's trade triangle is a potential entry point for the S&P 500.

My portfolio is little changed since I last updated you. I have made some adjustments, but those were due primarily to the approaching expiration. I have started rolling into August and shutting other profitable positions down. Yesterday's surge may see my roll one or two bullish time spreads into vertical spreads, but I don't expect that a lot of modification will be needed.

Good trading!

Christopher Smith
TheOptionClub.com