US Stocks: Building A Base

Back on April 7th in a blog entry entitled Dow Theory: US Stocks On The Verge Of A Rebound, we pointed out that a close above 12,768 in the Dow Jones Industrial Average (DJIA) would confirm a bullish signal. We got that confirmation on the close Friday (April 18th).

Prior to that, in a March 19th Asbury Alert , we pointed out an emerging bullish pattern in the S&P 500 and said that: "a close above the March 12th high at 1,333 would confirm the pattern and target a rise to at least 1,390."

Here's the chart from that report.

The SPX closed at 1,298 that day, but rose to close above 1,333 two business days later, on March 24th, to confirm the pattern. The next chart points out that our 1,390 initial target was met about three weeks later, on Friday April 18th, the same day that the bullish Dow Theory signal was confirmed.

Combined, these technical factors tell us that the US stock market is in the process of building a base. It is doing so because the forward-looking US stock market is starting to price in a recovery in the US economy.

Moreover, the sideways price activity of the past three months has resulted in the emergence of some new technical patterns. These patterns should be confirmed on any further strength in the market and, once confirmed, will provide us with new upside price targets for many of the major US stock indexes.

We discussed these patterns, what would be necessary to confirm them, and their potential upside targets in yesterday's (Monday's) Keys To This Week report.

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