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Friday, July 1, 2011

Friday Weekly Charts

I am quite short of time so I'm putting up only the SPX charts, which are, to say the least, quite important. I set a target here that I thought was the most probable top of the current rally, and we did hit it today, almost exactly. The timing, however, is way off, as I did not expect it to be hit until around mid July. The implications of that are that we may be looking at a completely different scenario than I was looking at at the beginning of the week. About now we should expect a pullback, but as of this point I don't think we are going to get another massive down leg, at least not yet.
The main reason for my change of outlook here is the sheer size of the weekly gain. If you look at the last 3 years, weekly gains this size come at the bottom of corrections, as this one did, and have led to sizeable rallies. This one has a big difference: it comes on low volume, which might mean that a rally after this one might not be as strong. One thing is certain: another sizeable leg down in this correction is now unlikely, for at least a month, probably longer. If we follow the advice of John Murphy, however, we trade in the direction of weekly stochastics, which are now undoubtably up.

I don't have the new highs data so I won't be able to put up a new highs post. I do expect to have all my normal weekend posts this weekend.

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