In the market Monday, we had a slow climb in the morning as the S&P proved to be heavy. In the afternoon a tractor program was turned on to keep the S&P moving on up into the close. While there were still shorts continuing to reluctantly cover, new buyers were not to be found as the S&P bumped its head up against three resistance lines in the final hour.
Chart 1: S&P closed right at the resistance line across from the early August low.
Chart 2: S&P closed up against the underside of its 200 day SMA line.
Chart 3: S&P closed right up against the lower line of the long term blue channel.
Chart 4: Shows what is to be gained if they can get it across these lines. There is a pair of large EMAs set up in a classic lift formation ready to start.
With Fed head Bullard stating late last week that QE may be extended, we have had a complete reversal of the bloodbath that was taking place right up to the moment he ushered those words. The shorts remember well when Bernanke did a 180 to completely surprise everyone when the market was in crises and now the market is climbing just upon the possibility that QE may get extended and more importantly, their stealth buying of the SPY and QQQ which has accompanied QE all along.
What happens if QE instead gets turned off as scheduled? The only sure thing would be that a lot of really angry shorts would come back into the market with a vengeance if they think they were tricked into covering their positions.