Bulls Break Out

After a May swoon and choppy sideways action through June and July, markets have turned sharply higher to break through solid resistance. More resistance lies ahead, but, for now, the bulls have moved the short, medium and long term trends to the upside.

chart courtesy of StockCharts.com In the point and figure chart of the S&P 500

we see that a triple top breakout occurred last week on August 7th which is a strong bullish signal and the upside price objective is 1550. Strong resistance lies between here and 1420 which is the yearly high set in April. Support and a negative trend change lie at the blue bullish support line at 1340-1350.

Economic news last week showed jobless claims improving while productivity was up and labor costs were down over the previous month. Europe remained a hot spot as Italy reported another quarter of declining GDP and Spanish 10 year bond yields stayed near the “unsustainable” 10% level.

Overseas, Mario Draghi continues to rally his forces to save Italy and Spain and so global markets seem to be counting on central bank intervention to once again save the day. For the week, the Hang Seng

gained 1.8%. The S&P 500 gained more than 1% while the Dow Jones Industrial Average

climbed 0.9% for the week. The Dow and S&P 500 are up for five weeks straight while the S&P 500 is up 10% since June 1st. The Nasdaq Composite

added 1.8% on the week to log its fourth weekly gain in a row. The Russell 2000

added 1.6% for the week While fundamental indicators remain troublesome with slowing global economies and persistently high unemployment, markets are looking for more help from the Federal Reserve and European Central Bank. Key events will be Dr. Bernanke's speech at the annual Federal Reserve symposium in Jackson Hole at the end of August, Mario Draghi's success in engineering a resolution to the crises in Spain and Italy and the Federal Reserve September meeting at which a new round of quantitative easing is widely expected. Next week brings a raft of economic reports including retail sales on Tuesday, Empire State Index, Industrial Production and Home Builders Index on Wednesday, Weekly Unemployment, Housing Starts and Philadelphia Federal Reserve Report on Thursday and University of Michigan Consumer Sentiment and Leading Indicators on Friday.