SP500, clear for lift-off !!??

A very strong performance across the equity markets yesterday, seems to hint that last weeks fears of a setback have abated, and further gains are now favoured. The chart below shows the Weekly SP500 after last nights close. Yesterday's price action appears to have overcome a potential hurdle in terms of the line connecting the peak of 2007 and the Apr 2010 peak. Whilst I do not consider this a majorly important line, since it only included 2 touches, and did not define a trend or trend channel, it nonetheless had the ability to become significant if it held the markets advance at around 1150.

I have also highlighted the Inverted Continuation Head + Shoulder pattern on the weekly. The consolidation of the past 2 weeks appears to have been a break-out consolidation, and with the re-test of the neckline on Monday, it would appear that this pattern may have some mileage in it. The potential upside over the next several months, using the measured target would appear to be around 1249. Personally however, I am not a big fan of this particular pattern, however one can not ignore how well it appears to have formed. It also fits in well with my other Bullish indicators, I covered this in detail in a post on Friday which can be seen by clicking here. I always like to put the other side of the argument too, this was covered in detail too in Friday's post, and while many of these points appear to have been overcome in yesterday's move, there is always a risk of a false move sucking in new bulls, and forcing bears to cover.

One of the points I mentioned which had been giving me some concern was the performance of the Bank Index, this was a major laggard in the September rally. However this too showed good strength yesterday and there is growing confidence on my part that the pattern formed over the summer on this chart is a bullish Falling wedge pattern. Still I would like to see yesterday's high overcome as it coincides with two other recent highs, in addition there is a Gap from 10th/11th August a close above this would also be a strong Bullish sign (This gap also exists on the BKX index itself though it is much smaller). (The chart below shows these points).