Many seem to be in disbelief of this rally given the poor economic backdrop. However, technically the rally needs to be respected until proven otherwise. Let’s take a look.

click on chart for sharper image

There is enormous technical resistance in the area between the two thin lines. Moreover, there is still a possibility of a headfake above the 50 day Exponential Moving Average as we saw in January.

Yet, as long as the 50EMA holds, this rally should be respected.

The implied target is the 200EMA and as you can see that would be a substantial move up from here. Will we get there? I have my doubts. However, equity bears need to be aware of the possibility. Also note that the 200EMA is downward sloping, so perhaps the 200EMA is tagged at an area closer to 900 than where it is now.

Mike “Mish” Shedlock
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