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The French election proved to be a bigger “relief” than many (including me) had thought.
Prior to the election, we correctly interpreted the rise in volatility as a worry about “Frexit,” but it was not clear that there were so many investors sitting on the sidelines, waiting to buy once that election was out of the way.
SPX broke out on the upside on Monday and Tuesday. We had previously mentioned the “pennant” on the SPX chart (red lines on the accompanying graph), and the theory is that once a breakout occurs, it should be strong. That formation doesn’t always work, but this time it certainly did.