Wednesday, November 18, 2015

Who Knew? S&P and Biotechnology set to climb

Who knew that war, terrorism, options expiration week and interest rates (possibly) climbing in December could be a bullish sign for the market. It was back in August that I stated that once the correction was done we could see the balance of the year with a ascending market. Except for the recent hiccup, that forecast has been remarkably resilient.

Springheel Jack made the near sighted prediction that a failure for the S&P to break the middle bollinger band would be bearish for the market, which although technically correct I feel didn't take into account options expiration and the Fed. His prediction that a break above 2060 would mean that a high at around 2116 would be tested is I feel spot on. This move also shows that the series of higher lows creating the green line on my diagram was a mega-strong resistance and the platform upon which our double top is going to be made.
One of the places I think this market transition is most profitably evident is in the Biotechnology Index $BTK. I was thinking to myself three days ago how instinctively the biotech's were building up to something but really didn't make it evident until the EMA(13) crossover of the EMA(34). All the momentum indicators are positive and the full stochastic (5,3,3) still has room left for an ascent. Most critically though is that $BTK has broken out from the diagonal resistance line made by the four lower highs in July, August, September and November. Biotechnology is listed as a long/buy.