XJO Resumes Climb

The XJO finished a strong week of gains by punching through 4,900 decisively. On the daily chart, following a brief fade away from the upper bollinger band, the XJO is again testing the line of resistance from mid-November 2012. A retest of the 100% retracement of 4,969 (April 2011 highs) seems more inevitable by the day as the current rally marches on. This would imply only around a 50 point upside from here before major resistance. MACD divergence on the week was impressive for the bulls, who carry all the cards at the moment.

The weekly picture shows the XJO nearing its upper bollinger band as well as the 50% retracement of November 2007 highs, at 4,962. Similar to the daily chart, the current position would imply resistance to be tested very shortly. One thing to also note is a golden cross forming between the 50WMA and the 100WMA. This may give the XJO the firepower to crack the important barrier coming up next.

We feel no reason to abandon a bullish stance for now - we reiterate that until the trend breaks down, there should be no reason to jump off the bandwagon. Also of note may be a cup and handle formation building - which may see a significant breakout that takes us past 4,962, however we are more comfortable distancing ourselves from this school of thought for now. Nevertheless, investors should be cautious heading into next week as our target around the 4,960 region looms large on the radar.