The Market did Breakout. Yes o No?

Hello my Investors, Traders and Reader Friends. Yesterday, the market gave a surprise, posting its biggest gain of the year. The DJ-30 closed in 13,177 points, increasing 1.68%. The SP-500 grew at 1.81% and the Nasdaq Comp. was increased by 1.88%. In all three cases, the volume was higher than the day before. Also. the three indices reached a new high.


Since the market began to rise a few months ago, has questioned the consistency of this climb. Various reasons have been mentioned in this regard. On the one hand, it is said that the volume has not accompanied the growth. Therefore, this is growth without a solid foundation. In technical terms, a price increase is not accompanied by an increase in the volume is still precarious. This means that this rise can fail at any time and change the trend.


It has also been speculated that this growth is explained by external intervention. It is assumed that the Fed and the ECB are "manipulating" the market, in order to support economic rescue programs that are running. This has caused a rise in Wall Street and a considerably low volatility in the market.


It has also been noticed that the growth of earnings of the companies has been very poor. Some think that this is the main factor driving the market. Therefore, growing little earnings, the market should grow too little... or not grow. 


Finally, we mentioned that a number of technical indicators like RSI, MACD and the oscillators are showing "negative divergences", This could indicate a certain vulnerability of the market growth. 


However, yesterday's gains meets all components of a breakout... minus one. Again, the volume was absent. The following chart may be seen all these elements. This is a weekly chart where you can see the way yesterday, the DJ-30 breaks a base of price built since April last year.

A break of this magnitude would allow to expect a great future growth. The chart also show a positive and rising RSI. Very positive sign that supports the growth of the market. In addition, the MACD is positive. However, in this case the weekly bar of MACD corresponding to the break not grow. This can be interpreted as a sign ambiguous.


But the element that is completely absent is volume. A good breakout requires a high volume. In this case, the volume did not show growth. It was the lowest (in terms of week) for the last two years. What does this mean? Basically, the new level of support can be very fragile.


Therefore, it could easily be violated if the market change direction. If the DJ-30 drops below this support level, we would be in a bear trap. It this level is not broken in a short time and the market keeps rising, this break will be strengthened. But until then, will the weak of this growth factor.