Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics

Greece’s electorate has chosen to stay in the new world rather than retreat to the old. And the Federal Reserve has backed up its words regarding liquidity and accommodation to support economic recovery. That about sums up the latest news, which has helped the technical picture. Stocks have been able to break out of a holding pattern and continue the June rebound after a dismal May.

The Fed slightly lowered its growth forecast for the U.S. economy to 1.9-2.4% this year, and at the same time extended Operation Twist, which was to expire this month, by $267 billion. Some market observers think that this modest response was intended to signal confidence, since a more aggressive QE3-type of response may have been have given the impression that economic straits are dire.

As a reminder, Operation Twist is a program that swaps short-term bonds for longer durations, reducing interest rates on mortgages and business loans, i.e., provide cheap credit. However, at the same time, lenders have been more stringent with qualification, so borrowers have not necessarily found access to the cheap credit.

In addition, the Fed raised its forecast for the national unemployment rate, predicting it will end the year north of 8%-pretty much where it sits today. However, ConvergEx points out that the median rate when you go state-by-state is closer to 7.3%, and the massive state of California (where I live) is the biggest laggard at job growth. California is known for a lot of wonderful things, but business-friendly is not one of them.

SPY closed Wednesday at 135.48. The prior bear flag pattern shown was initially confirmed as June began, but the 200-day simple moving average provided immediate support, and the market has steadily rebounded. It had gone into a holding pattern between 131 and 134, as I discussed last week, awaiting its next catalyst to either break out or break down. This week we got the breakout. RSI, MACD, and Slow Stochastic oscillators have been forming higher lows, which was foretelling some anticipated bullishness.

Now SPY finds itself at the upper Bollinger Band and back above its 50-day simple moving average (SMA), but hitting resistance at the 100-day. We could see a pullback to test resistance-turned-support at 134, or we could see a breakout above the 100-day SMA. In either case, bullishness is in the…
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