S&P Breakout has Significant Ramifications

If there is one constant in the market it is that the market constantly changes. Summer is supposed to lull traders to sleep as the market drifts on low volume. This year is different. We moved from a very poor year last year where volatility levels hit all time lows and trading accounts suffered drawdowns when breakouts and breakdowns failed to follow through. Now here we are in the middle of July and the S&P just broke out into a new 4-year high. Significant about this breakout is the fact that it doesn’t appear to be slowing down any time soon. The price action over the last week has pushed the index through a long term triple top pattern projecting significant growth over coming months. The NASDAQ has yet to test its overhead resistance, but the S&P is free and clear for some time to come. Under such conditions pullbacks become buying opportunities and breakouts tend to succeed at a significantly higher rate. Technically we can find no reason why this breakout could be false. It would take a fundamental change in the current market environment to slow down this momentum.