Fighting for the Monthly Chart

After rallying for two days on decreasing volume the bears took control of the cash S&P500 yesterday. A strong downtrending day has taken prices to just above last Wednesday’s low.

There are two items of major interest to me this morning. One; that yesterdays open was right at the short moving average on the weekly chart (shown at left). This moving average has acted as strong overhead resistance during the past few weeks (see chart). Two, yesterdays price decline has wiped out the potential technical “buy” signal that was building on the monthly chart (see my August 1 post). Of course we still have four more trading days to go – we’ll see how it ends up. In any event, these two facts cast more of a bearish tone to things as we head towards the traditional end of summer here in the States (Labor Day).

The short-term question now is whether the bulls can hold 1261. Even if they can I don’t think it will amount to much as far as price goes. In fact; I think what the bulls really want to do this week is turn the just-mentioned monthly chart positive. That is where the real battle lies right now. They know that (at least the initial) bounce up from the July 15th low of 1200.41 is over. But can they save the monthly chart? I think we will see a decline that drops below 1261 by early September. In fact, we are now starting to stare at a re-test of the mid-July low; which I think will hold (at least on this retest).

The Wilder Directional Movement System continues to show price in a trading range (non-trending). The Parabolic SAR now stands at 1299.62. The under-development trading system (currently short from 1276.84) will be stopped out on a move today above the SAR.