The S&P 500 has broken out from its large year-long “W” formation, potentially a very bullish development, says Ron Meisels, President of independent research house Phases & Cycles.
Meisels thinks that recent price action reinforces his view that the February 2016 low was a major low and marked the start of an important up leg. The first leg of this up leg ended with the April/June 2016 highs and the subsequent “Brexit” low can now be seen as marking the end of a normal correction. As such, Meisels thinks we are in the middle of a Wave 3 that begun on 27 June and near the beginning of what could be a potentially explosive move upwards.
Meisels says it’s important to watch that the breakout is sustained above the 2135 level and that participation continues to broaden. So far, highs have also been made by the Dow Industrials and the daily NYSE advance/decline line is doing well, while the NASDAQ and NYSE Composite Index have moved above their April and June highs but have yet to make new highs.
Overall, Meisels suggests buying on minor pullbacks for the S&P 500 and adding to long positions.
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