On June 9, 2012 with the S&P trading at 1,325, the charts and developments in Europe told us to be open to a rally in stocks. Since making that argument, the S&P 500 has tacked on 134 points. What are the charts saying today? While a pullback most likely will come in the next three trading days or so, the charts say stocks can move higher.
Going over our market models and chart lists this morning, emerging markets caught our eye, which is not surprising given the Fed’s pledge to perform open-ended QE. Open-ended QE means “we will print as much money as needed for as long as needed”.
In the EEM/$SPX chart below, weekly RSI is trying to break out in a bullish fashion. Moves in weekly RSI often foreshadow moves in price. In terms of a trend change vs. the S&P 500, EEM broke above the downward-sloping blue trendline (see 1). Step two was the higher low (compare 2a and 2b). Step three would be a push above the green dotted-line (near 3).