Many seem to be in disbelief of this rally given the poor economic backdrop. However, technically the rally needs to be respected until proven otherwise. Let's take a look.

There is enormous technical resistance in the area between the two thin lines. Moreover, there is still a possibility of a headfake above the 50 day Exponential Moving Average as we saw in January.

Yet, as long as the 50EMA holds, this rally should be respected.

The implied target is the 200EMA and as you can see that would be a substantial move up from here. Will we get there? I have my doubts. However, equity bears need to be aware of the possibility. Also note that the 200EMA is downward sloping, so perhaps the 200EMA is tagged at an area closer to 900 than where it is now.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

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