I want to point out a very important trend that has repeated itself for the third time (so far) in the last year. If you take a look at a 1 year chart of the S&P (using weekly ticks), you’ll notice that the S&P broke out dramatically (by a similar degree to last week’s and this week’s breakout) on late August/early September and again on late November of 2010, setting a long white marabazou candle in the first week that eclipsed the previous 2 weeks’ highs (coming off a stream of ‘doji’ like candlesticks), and then ending the second week with a small white marabazou candle (real body) and a longer lower shadow (to the previous week). As you can see from the chart shown below (given the specified time frames shown above  – i.e. on late August/early September and on late November of 2010), every time there is a big price mark-up, such as the one we had last week and this week, the markets entered a period of consolidation were the major indexes essentially either stalled at this higher range, or keep trading higher at a more moderate pace; the key take away from this is that during that period following the price mark-up,  there is actually more selling taking place than actual buying. Remember, this is done because the majority of the investors that bought at the 200 DMA were institutional investors, which as I’ve said before, need to sell the majority of their holdings to the retail crowd at marked up prices.

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Figure 1