Pullback should be buying dip to ride continued stock rally: Technical & VIX charts

The first move from a cycle low is always bullish, and this one hasn't disappointed! I started feeling defensive about it late last week, and we did see some serious volatility this past week, although the stock market (plus the euro, oil and gold) managed to move much higher into Friday. Is it a blowoff island reversal, pointing to a bearish week next week? My technical and VIX (volatility index) charts say a deeper pullback or more serious consolidation does look due, but that it should be a buying dip. So KI$$ traders may either hang long, or take partial profits and buy in again later on a dip that reverses back up. Hopefully that'll be our usual end-month dip - we'll see!

A 50% retrace would put the QQQ at $54 and the S&P 500 at approximately 1153. But the SPX could notch higher to the 1250's where's there's real strong resistance. Further, 1160's were an important area on the way up. Just numbers to start thinking about if we see downside set in next week.

The VIX and McClellan Oacillator (the latter in a lower indicator window on my SPX chart below) both show negative divergence compared to price having made a higher high. On the other hand, the VIX so far remains under its Bollinger Band midline. A strong pullback could take VIX to its upper Bollinger Band, but that would be a buy signal for stocks. Fortunately for the bulls, additionally, the bullish percent for the SPX ($BPSPX chart lower down) has a bullish StochRSI. The $BPSPX is running into resistance at its own 200-day moving average (MA). But it's over 50, which is good, and that StochRSI is positive.

And the Arms index ($TRIN chart at bottom) is quite helpful too. While the value and short-term MA's aren't oversold - yet also not overbought - the longer-term MA's remain in oversold territory. That can happen in a strong downtrend. But now that trend reversed, it's a bullish backdrop that will help provide fuel for continuing the rally ride for a good long time. So a pullback should give an opportunity to get on board what may turn out to be the second leg up for a "Santa rally" into December.