Today I would like to quickly update the weekly chart; following up last weekend’s posting.
The positive divergence recorded at the March 6 low has led to a ferocious rally but we are still quite a bit below the previous swing high of 943.85. Recall that positive divergences fail in bear markets. If this rally fails and the RSI turns down from here we will still generate the three negative reversals identified last weekend.
That said the key in the paragraph above is “IF this rally fails and the RSI turns down …” There is no rule that says the bulls can’t continue their charge! One final point; I also keep a point and figure chart of the RSI. We have now reached the downward moving trendline from the RSI peak of May 16, 2008. Let’s see if the bulls can push it through or not, with a move above 877.86 being very bullish indeed.
In sum I still view this rally as the bear market variety.
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