Weekly Chart Review, December 6, 2009

Earlier this week a review of the monthly chart indicated that any move above the November high would signal a continued advance to at least the next TD Trend Factor target of 1145.47 if not the higher long and medium moving averages (1168 and 1195). Even though the price action has been sideways and volatile this past week we did move above the November high; which also confirmed the break of the old weekly TD Trend Factor target of 1079.39. The new weekly chart target is 1139.40.

With a closing price of 1106 on Friday, these targets are 39-90 points away. If reached they would represent a 3.5% to 8% gain from current levels. However; the longer term risk is high and so my position has been that if now long the “get out” point would be on a move below 1083.74. For those Longer-term traders/investors who are currently out of the equities I think longer-term risk is too high here to chase what could be the last part of the rally. This includes me personally and I continue to sit tight, having gotten out in early October.

Why do I think risk is high? Although we made an up trending (higher high and higher low) price bar on the weekly chart it doesn‘t inspire bullish confidence. Yes, It was an Engulfing Bullish Pattern candlestick; but, when this occurs in an uptrend (like we have now), it may be a ’last engulfing top’. This would be the indicated case if we were to close lower next week. This makes sense since a down close next week would lead to more bearish divergence between price and the RSI. 1083.74 continues to be a very important level for the bulls to hold.

That being said I must admit that against this bearishness we keep making higher highs and that the DeMark indicators have not signaled exhaustion of the up trend. The end result of this tension has been a sideways movement over the past few weeks.