We all knew that the S&P 500 would eventually break out of its recent pennant formation at some point. The only question was which way. Following the rally over the last two days, the answer is to the upside. As shown in the chart below, the S&P 500 finally made a higher high and broke out of its recent range to the upside.
While an upside break-out is considered positive from a technical perspective, we would hold off on sounding the all clear horn for now. As we often see in broad market indices and we have seen at points this year, these upside breakouts and downside breakdowns have often had a tendency to end up being head fakes. Remember how good the chart of the S&P 500 looked on 5/18/15 when it looked like it was breaking out to the upside?