Nice rally now to continue higher or at an end...

From last signal it took several days (and few sell-off days) before blasting higher for the major indexes. Now the indexes are at an important point of what appears to be a break-out higher of a bullish 'inverse head and shoulders' pattern from the chart below with the green line. Also there's a potential bearish 'double top' pattern in the chart with the red line. The stock market is near short term over-bought so there could be some near term consolidation/pause before one of these two patterns take control. My take is that the bullish pattern will be in control... but we'll have to see what develops. I also marked another red line of the last time the indexes (using the SP500 below) last 'touched' its 200 day moving average. General rule, the major indexes usually don't go beyond 12 months without re-touching its 200 day moving average. Like my last post noted, the major indexes will either continue higher and then 'crash' back later toward the 200dma... or break down lower now toward the 200dma and then move strongly back higher later (that will depend which of the two bullish/bearish patterns take control in the coming days.)

The pause/pullback is given way to a low soon...

The stock market gave up little ground since last week's signal for a pause/pullback and is now hinting of a possible short term low with a set-up for a rally. For the medium term, I'm uncertain if the stock market will continue to grind higher from current levels or that it'll content with consolidating and eventually sooner rather then later the need to retest it's 200 day moving average. In most cases, the major indexes will retest their 200dma within 12 months. It has been almost 7 months since they last touched their 200dma. So the uncertainty is will the major indexes continue higher for several more months and then crash back down (like beginning of May last year because of the 'flash crash' when it finally retested their 200dma after 10+ months.) Or the stock market will get over it by moving back lower (over +5%) and retest by summer time and then power back up afterward.

The chart below is the Nasdaq and will likely retest the 50dma (blue line) and because of short term oversold should get a short term rally. The red line is the 200dma and the uncertainty for the medium term is whether the stock market will retest it soon rather then later.

Great short term rally in need of a pullback/pause?

Very strong rally in the past 10+ days usually a very good indication of further upside for the next 6 to 12 months (or at worst, limited downside from the March bottom level.) While the major indexes have moved up strongly... Dow, SP500, and Nasdaq, there were some technology sectors that lagged or gotten hit to the downside such as networks and semiconductors. So while the long term view (6 to 12+ months) is still bullish for the stock market, the short term (from a few days to a few weeks) is due for some pullback. For the medium term (1 to 3+ months), the recent very strong rally has a history of being forwardly bullish but I would still be cautious of a bigger pullback or even a retest of the March lows if the pullback is more than +3%.