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Chart of the Day: Breakout in the S&P 500

One of the tools I use to evaluate market action is the standard deviation spike, which expresses each day’s return a standard deviation of the previous 20 trading days. (This tool is also discussed in The Art & Science of Technical Analysis.) This gives an important perspective on market action—taken on nominal basis, yesterday’s 2.0% rally was moderately impressive. However, on a volatility-adjusted basis, this was the largest upward close in the historical record for the S&P 500. This is extraordinary. What do we know about large upward closes? Look for a blog post this weekend, but the probabilities strongly favor higher prices in the intermediate term. Also worth considering is that this is a classic breakout from a consolidation against an important resistance level, following a failed failure test a few weeks ago. All of this is powerful evidence that the bulls are in control of this market.

AdamHGrimes

Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.
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