The Weekly S&P 500 Chart

I hope everyone is off to a good start this week. I had to take a little hiatus last week, hence the lack of posting, because I had to prepare for a criminal jury trial that was supposed to start this morning. After spending most of last week preparing, I found out just yesterday that the government's key and also necessary, witness was not going to testify and hence, the charges were dropped against my client. This is great because now I get to get back in touch with the market.

I thought that looking at a weekly chart of the S&P 500 would be in order because the longer time frame chart helps us stay in touch with where the market is within the grander scheme of things. Personally, I think the equities markets will continue to rally for 3-6 months, with a few dips along the way and then they will hit some resistance and fall hard...very hard. Here's the weekly chart of the S&P with my TLT Trender v2, a stochastics and the fisher ma indicators. As you can see, the S&P is in buy mode according to the TLT Trender, but it is overbought according to the stochastics. Overbought readings on the stochastics are not uncommon during rallies, especially when the rallies are achieving new short term highs. I would not allow the stochastics alone to keep me out of the market, I would just take it as a word of caution. Now, if the stoch pulls back into neutral and maybe even into slightly oversold territory, then I will use it to determine when to buy the dip.

Also, I drew a box around some of the price action and posed the question of whether this area will be the new range. I would not be surprised if it does indeed turn out to be the range. The market will likely test the upper end of that range within the next 4-6 months, and the reaction to that test will be what is important to watch.

One other observation right now is that the Pound has pulled back a little from it's massive rally and this pullback may provide a good opporntunity to jump on board this trade if you're not alreay in it. Just make sure to set a hard stop and stick with it!

Have a great day.

TLT