The US SPX 500 Index has confirmed a break out above resistance at 1,292 – 1,300, signalling higher levels not only for US shares, but share markets around the globe. Targets for the index are now
the previous highs around 1,350, and the twelve month high at 1,372.
A feature of markets (and especially share market indices) since the GFC is the number of false signals seen on charts. The US SPX 500 Index has been on my radar for two weeks, as it approached a key resistance level at 1292, and psychological resistance at 1,300 – you can see why on the chart from the CMC Tracker platform below:
Last night’s action was instructive. An initial rally, a sell off into negative territory, and then a rally back to close in positive territory suggests underlying strength. The close above 1,315 also keeps the index well clear of the break out level, adding confidence that this is a true signal.
Add in a better flow of US economic data over the last two months, an upcoming company reporting season and some interesting quant analysis that shows a greater than 3 % gain in the first three weeks of January has resulted in an average gain of around 8% by the end on April (on 10 out of 10 occasions since 1950) and there appears to be very good reasons to trade the US SPX 500 from the long side.