Archive for July, 2009
Market Update 7/22/09
The markets are exhibiting extremely bullish chart patterns and price action. Both the S&P and Dow are testing the neckline of the right shoulder of a large inverse head and shoulders pattern that spans from Oct, 2008 to now. The completion of the right shoulder of this pattern negated the smaller head and shoulders pattern that formed between May and July. The VIX has also been dropping steadily to more normal values. It now appears that the path of least resistance for the markets is up. A break of the inverse head and shoulders pattern neckline to the upside projects a target of 1150-1200 on the S&P and 11,500-12,000 on the dow. The market could move rather quickly to these levels. For this bullish pattern to be negated the market would have to reverse course and break below the neckline of the smaller head and shoulders pattern which would target the S&P to the 800 area. Right now that seems highly unlikely and it looks like the bull will be charging. The bear market is not officially over until the bear market downtrend line is decisively broken. That now sits at around S&P 1200, right at the top of the price target projected by the inverse head and shoulders pattern. The S&P 1150-1200 area should provide strong resistance. A decisive breakthrough of this area would confirm the new bull market. Failure to breakthrough this area could signal a resumption of the bear market or a range bound market.
