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<\/p>\n\n\tBy Rudi Filapek-Vandyck<\/p>\n
\n\tAugust is looking to become a very interesting month, reports the TechWizard. US equities have rallied hard in July on the back of a positive Q2 results season plus surprising resilience in European economies. The rally has quickly reversed the technical picture and more and more technical signals are now in positive territory.<\/p>\n
\n\tThe TechWizard notes the S&P500, as well as the Dow Jones Industrial Average and the Nasdaq have all posted a second monthly close reversal on price charts. This could be a very positive signal as it indicates the bias for US equities is now to the upside.<\/p>\n
\n\tA close reversal, explains the Wizard, is when price action initially sinks below the previous months' low, but then rallies above the previous months' high. This, he explains, usually sets up a trap for short term traders going short and subsequently forces these traders to start buying.<\/p>\n
\n\tThere is now a genuine chance more and more shorters will find themselves on the losing end and their forced buying activity might support markets in August, says the Wizard.<\/p>\n
\n\tAlso, a standard rule among chartists is that the bigger the technical signal, the more important it is. The fact that these close reversals have appeared on monthly charts is thus a powerful sign, he explains.<\/p>\n
\n\tIn addition, US equities seem to have found support at the 20 moving average (M\/A), which is also a powerful positive indicator, says the Wizard.<\/p>\n
\n\tAll of the above increases the odds for a powerful rally on a 1-2 months horizon, he says.<\/p>\n
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