Let's start by looking at how the SP500 has performed in the month of January. From the monthly chart, one can see the price broke below the long term rising price channel and it ended January with a loss. Next observation from the chart is it printed a candlestick with a long wick and it has retraced back inside the price channel. This monthly candle could be a sign of near term selling exhaustion.
On the weekly chart, it shows the price closed with a gain in two consecutive weeks and the strength of the upward price movement was confirmed by the MACD positive divergence. Another sign of near term price reversal.
Not to be outdone by the longer time frame, the daily price strength was also confirmed by the positive divergence from the Stochastic along with a positive MACD movement.
Furthermore, a compact daily bull flag had developed and was broken out last Friday. The 100% measured move price target of this bull flag is near the 1970 level and it is in confluent with the 50% retracement between the all time high and its recent low.
Finally, the 1 hour intraday price chart shows the breakout of an intraday inverted head & shoulder pattern with a 100% measured move to the level near 2021, which is near the September 2015 FOMC announcement day intraday high of 2020.86.
After the 1/20/2016 low, the SP500 appears to be in a recovery mode (relief rally) and the price action continues to point toward the September 2015 FOMC meeting high. Until the market has sent us a message that the price is reverting back to the down side, the magic continues to propel the SP500 toward the 1995-2021 region.
