What a week !

After a couple of weeks during the festive season where the market traded within the 3,800 to 3,850 range on lighter than usual volume, we finally saw a decent upward move this week as trading volumes began to return to normal levels. The chart of the S&P 500 index tells an exciting story:

We convincingly breached the 50-Day SMA and by the end of Friday's session, we had breached the 200-Day SMA. We are now touching the well-recognised resistance trend line. The next few trading session are going to be very interesting. Will there be enough buying enthusiasm to significantly breach the resistance line? If not, will any retracement be just a minor one as the market takes a breather before attempting another run at resistance?

The real development here is the sequence of lower lows and lower highs has been broken. This week we established a higher low ... always the first step to a market recovery:

If market participants believe the worst of the macroeconomic figures have passed and the market has already priced in a mild economic slowdown, then we could see a steady recovery from here, or at the very least, a period of consolidation where the market trends sidewards for a while.

The lower high means there's the real possibility the bottom may be already in, and this should encourage us all. Let's hope any bad news from here isn't bad enough to undermine our green shoots of recovery.