Investors tend to be swayed by all the media hype and continuous chatter by analysts and commentators. The Brexit event is a good example. Investors were very bullish ahead of the Brexit vote and then turned extremely negative after. But in the end, the changes that the Brexit vote will eventually or may eventually bring may not be known for months or even in some cases, years. But that’s the mystery behind investing. Knowing what investors may end up doing next.

Today was a great example. Yesterday investors were turning fearful and last night after the close the stock futures and analysts were bearish on their outlook for Wednesday. Instead stocks dipped and then rose to end the day positive.

S&P 10 Day Chart

Reviewing chart patterns of both stocks and indexes can go a long way to understanding which way is “right-side-up” when it comes to investing. If we look at the 10 day chart for the S&P and add in the Ultimate Oscillator, you can immediately see that the recent pullback on Tuesday was an opportunity and not the start of another plunge in equity values.

If we compare the strength of the plunge using the Ultimate Oscillator from Friday June 24 and Monday June 27 against all the dips since then, you can immediately see the present pullbacks have less strength to the downside. Indeed this morning’s dip failed to turn the 10 day Ultimate Oscillator chart negative which was a clear signal that the SPX was not going to revisit even the lows from Tuesday. This is also why “buying the dips” remains highly profitable. With a chart like the one below, we can immediately see that buying the dips is the way to trade the present market weakness.

SPX July 6 2016

SPX 10 day to July 6 2016

The above chart shows us that investors are determined to try to break above 2100. This is very strong resistance and a sustained moved above 2100 would be quite bullish for equities. To the downside there is a lot of support at 2050 but it is still 2000 that is holding the market up.

Knowing that those two support levels are still very much in play, allows for trading comfortably while waiting for the markets to try once more to break through 2100 and finally set new all-time highs. Whether that will happen or not is anyone’s guess.

But the rally today from 2074 to 2100 in the S&P is a rally of 26 points for a one day move of 1.25%. That kind of intraday rally, is usually followed by more up moves in coming days.

Today’s rally was great to see and continues to confound those investors who cannot figure out why this market refuses to fall apart. Heading into the unemployment numbers on Friday, don’t be surprised to continue to see strength on Thursday in the overall indexes until we get to see June’s unemployment numbers.

Whatever happens on Thursday, remember that simple technical tools, such as the Ultimate Oscillator in the above chart, can go a long way to bringing in profits to a portfolio while protecting an investor from trading on the “wrong-side” of the market direction. Often just taking a quick glance will assist in keeping an investor safe.

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