Market May Be Ready To Break Higher

The trading range we are now in has been one of the most persistent we have seen in several months. On Friday prices broke through lower support, but the effort on the part of the sellers was weak at best as volume levels remained low throughout the day. Then, during the last 1/2 hour, prices spiked back up into the range on high volume.

We have to give the win to the bulls on Friday for averting a breakdown and for the strong volume into the close.

The trend remains transitional but we have adjusted our position to light long due to the increasingly high probabilities that this market will experience a strong short squeeze due to all the failed break downs recently. Short traders are getting frustrated and if the market can break higher, there should be a lot of short covering fuel to power the market sharply higher.

Add to that, we should see new money come into the market, which always happens at the end of the month when funds receive capital inflows from 401k plans, et al.

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Outlook:

The current outlook now depends on the direction the continuation triangle pattern breaks. If it breaks to the upside, then we expect prices to rally into the falling 50-week average for a high probability shorting opportunity. If prices break lower, prices may retest January lows for a high probability buying opportunity.