After almost two months trading in a narrow range, sideways consolidation , on Wednesday both the Dow and the S&P 500 finally broke out of the range, breaking to the upside. As long as they can stay above the breakout price level the uptrend is going to continue for a while as short-sellers scramble to cover their shorts.
All major indices are now in overbought territory but short-covering activities could continue to push the indices into more overbought territory before they tops and profit-taking activities stops and even reverse the rally.
On the short-term time frame key price balance point on Thursday will be 5140.
-- Short-covering activities is likely to cause a gap-up opening on Thursday, if so, look for the rally to continue with or without a pullback. As long as pullback remains above 5140, the uptrend should continue to another higher high.
-- Trading below 5140 is going to run over some stop losses and can cause some selling. If so the next support is 5100.
