Weekly Chart Update for August 23, 2009

After four consecutive up trending weeks we finally had a pause (via an “inside” week) in the cash S&P500 during the week ending August 16. That pause in the rally continued early this week with a mild price decline but was followed by a strong push higher during the end of the week. The result was an “outside” week where the low is lower than the previous low and the high greater than the previous high.

The rally over the last half of the week exceeded (and qualified) the TD supply line (downward sloping red dashed line) which was at 1006.12. Additionally, the index has now also qualified the break of the 38.2% Fibonacci retracement (horizontal blue dashed line) at 1014.14. If these breaks are confirmed over the coming week they imply that the bull move from the March low is continuing. The price projection from the broken TD supply line points to a target hundreds of points higher! A confirmation of the Fib retracement break implies a move to at least 1122; the 50% Fib level.

Lower, more immediate targets also exist. The next TD Trend Factor target (based on the July 10 low) is at 1079.38. The Long-term moving average (green line now at 1095) is falling towards this level .

Of course, it takes two sides to make a market. On the negative side …. The only bearish concern on the weekly chart is the “closeness” of a TD Combo (dark red) 13. We have now reached 12 bars. But 13 is at least a week away and we can worry about its implications if; and when, it comes.

Bottom Line: Last weekend I stated “To me, the lack of a DeMark signal implies that even if we have started a correction it does not mean that the rally from March is over.” In fact, it appears that all we got was a minor pullback and the bigger bull move is back on with potential upside targets as described above. Over the very short term we still face some downside risk and I will discuss that tomorrow.