Today's chart here shows what a false breakout or breakdown looks like on a monthly chart. Generaly speaking they do not occur often as the monthly chart I believe is very hard to reverse unless there is some sort of event that the stock is partaking in (M&A, earnings, etc). In terms of this chart of the S&P since the early 1990s, we can see that first the index is mired in one very large 800 point trading range. Sure the S&P actually went outside both sides of this range (in March 2009 well outside) but each of those breaks of the rnage found buyers wihin a month or two. The change in the trend within the rnage was confirmed by the move past the 13 month MA - each time the signal has confirmed a move to the to of the rnage was coming. As we all know, the last few months has brought hte markets below this key moving average a few times though currently we reside above it.
In a note last week ago, I argued that if the market can get past the June highs, we would have a bona fida reversal to the upside in stocks - a candle reversal of sorts. The move over the 13 month as shown is the first step in confirming the breakout. The second would come from a move over the 1130 level. So while I continue to fight the good fight on the long term trend of the market, the S&P needs to climb the ladder over 1131 to confirm the reversal. Otherwise the bull market will be at risk.
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