Since then, the SPX weakened to test an important technical support at 2040, which represents the neckline of a potential head and shoulders formation. (As all good technicians know, a head and shoulders formation isn't complete until the neckline is broken.) While the market did break 2040 last week on an intra-day basis, neckline support held. In addition, the NASDAQ Composite confirmed the strength today by staging an upside breakout through resistance.
At the time of the bearish trading call, I said that I would turn bullish if:
- The US stock market got oversold and sentiment models flashed a crowded short reading; o
- The stock markets improved in Europe or Asia.
Let's consider what has happened since then.
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