It was a strong week for the cash SP500 as both the long (green) moving average and supply line (red dashed) were broken in a qualified manner. If those breaks are confirmed this week then the bounce from the August low is alive and well. However, as before, I think that the short (red) or medium (blue) moving averages is the best we might get before the larger downtrend asserts itself.
Besides the reasons spelled out last week, another piece of evidence supporting an ultimately bearish resolution is the REI indicator shown in the top pane. The fact that the REI has been oversold (below the bottom blue line) for six weeks now indicates a trending market. In such a case we should look for the downtrend to reassert itself with a new low being made over the coming few weeks.
Bottom Line: For this week it will be important to see if we get confirmation of the upside breaks of the long (green) moving average and the supply line (dashed red line). A failure to confirm would be bearish. The allocation meter is at a +50% and I am expecting the August low to give way after this consolidation/bounce completes.
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