Fed Speak and Debt Ceiling Will Fuel the Rally. Should Hit SPY $181.50 With Ease

February 11, 2014

Last week, the market established support at SPY $173.60 and it was tested two days later. That was the uptrend from last June and it was the breakout in October. Support held and buyers bought with vigor. That was the capitulation we were looking for.

The SPY is back above the 100-day moving average and we are seeing follow-through.

The news is fairly light this week and the price action will be pure. This will give us a clear picture of what lies ahead.

Earnings season is winding down and there are not many economic releases.

Janet Yellen is testifying before Congress. In her prepared statements she said that there is not a predetermined tapering schedule. If economic conditions deteriorate, tapering will be postponed. She is considered by most analysts to be dovish and her statements should be neutral to slightly bullish.

The House could pass a bill today. They want to extend the debt ceiling by one year with the caveat that some military benefits are restored. This will be popular with voters and it should resonate with Democrats. A deal is possible before they go on recess tomorrow. This would be very bullish.

China will release its trade numbers tonight and they could be a little soft.

Stocks want to move higher. The price action this morning is very bullish and “Fed Speak” will support the rally. Any whisper of a debt ceiling deal will fuel the move.

I believe we will challenge resistance at SPY $181.50 this week. If we easily move through that level, we could run up to the highs of the year. If the momentum stalls, we could be seeing the start of an intermediate trend change.

I will monitor this rally and time will tell. We don’t need to worry about that now, we just need to manage profits.

Stay long and ride the wave. I am moving my stop up to SPY $179. I have huge gains and I don’t want to risk them.

We should be able to get to SPY $181.50 with ease. That is my first target and I will take some profits we get there.

I told you last week this could be one of the best moves of the year. I hope you are on board.
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