Friday November 5, 2010 - 00:56:05 GMT
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Forex Hound - www.forexhound.com
U.S. Stocks Finish Strong; S&P Establishes New Support
equity markets rallied sharply overnight, hemmed and hawed about mid-session
then took off higher into the close. The catalyst behind this rally was the
fresh liquidity being provided by the U.S. Federal Reserve. Once again Europe
and Asia had the jump on U.S.
traders who bought into the bullish news but quickly backed off when prices got
too lofty. This led to a slight setback about midday, before fresh money
stopped the slight, triggering a late session rally.
The December E-mini S&P 500 broke out to the upside over
an old top at 1200.00. According to basic chart theory, this â€śold top should
become a new bottomâ€ť so donâ€™t be surprised if this level is tested. The
reasoning behind the theory is that, the first time through the top, stops are
hit and shorts cover. On the retest, fresh buyers who didnâ€™t chase the market
higher usually step up to defend the breakout point.
Technically, if a pullback to 1200.00 fails to hold, then
chances are a new short-term top has been formed. If this becomes the case,
then based on the near-term range of 1167.75 to 1218.75, look for a possible
retracement back to 1193.25. A test of the 50% level will also line up with a
test of an old top at 1193.00.
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