Tuesday, September 08, 2009

Indicator Update for September 8th

After early weakness this past week and a subsequent rebound, we have the major S&P 500 sectors trading in either neutral modes or weak uptrends. As we can see, market bounces have been occurring on lower levels of upside momentum (top chart) in the Cumulative Demand/Supply Index. We're also seeing fewer stocks participating in rallies by registering fresh 20-day highs (bottom chart). These divergences are a large reason I have been viewing the current market action as part of a broad topping process.

Still, it is clear--particularly from the Cumulative DSI--that we are getting relative oversold readings at successively higher lows in the market, which is the mark of a bull market. Until that pattern changes, it is premature to conclude that we're rolling over to bear status. I will be watching closely to see if the bounce started late this past week gains strength and participation as we move toward the bull highs. Thus far, intermarket themes do indeed support such strength. I will be tracking the indicators each morning prior to the market open to gauge whether we're picking up strength on the rally; you can follow the tweets here.

Here are the weekly price targets for SPY: Pivot = 101.73; R1=104.31; R2=104.83; R3=105.52; S1=99.15; S2=98.64; S3=97.95. We will be opening the week trading above the pivot.