We are being squeezed between two moving averages. Which way will we break?
In the last daily update (1 September) we saw the cash SP500 react downward after reaching the medium (blue) moving average. We then barely held contact with the short (red) moving average. From the short moving average I was expecting that we would reach for an even higher target. However, we reacted negatively once again to the medium (blue) moving average yesterday which is now parallel to the TD Supply line. And once again -- down to the short moving average. What now?
At this point I still think the bulls have unfinished business to the upside. That said, I think the fight today will be over the weekly price flip point of 1178.81 and keeping the daily RSI above the 38 level. A failure to do either will lead to a test of Demand (upsloping dashed green line) and the September 6 low. The price pulse model says that the bulls have failed if we break below the August 22 low of 1121.09.
Higher targets include: 1245-1247 fibonacci and Trend Factor targets, the long (green) moving average and TDST resistance at 1332.
Bottom Line: I believe a counter-trend rally is underway from the early August low; albeit quite a choppy one. My mechanical allocation mix meter is at +50% - yesterday's post of 25% was in error. Until further evidence develops or we break 1121.09 I think that the bullish potential over the near term should be respected.
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