The market looks like it wants to bounce higher into early September. Today there was a bullish divergence on several indices and we should see more upside follow through in the next 5 to 15 trading days.
Two days ago we had an inverse hammer in the sp500 and today it was confirmed as a reversal signal. Daily MACD is in a bullish crossover stance and the recent test on the SPY was on much lighter volume relative to the drop in early August.
So it appears the market is not going to dive down into the Fed speech and GDP report this Friday. On the contrary maybe that day would serve as a continuation point to the upside.
If the market continues higher for 10 to 15 trading days it could set up a right extension similar to that which occurred in the 1987 crash and setup up a drop into Mid to late September and October. The 87 crash had similar looking ‘W’ bottom before it rallied one more time and then plummeted in October. If we are going to do this again, then it would say that the August 2011 decline was simply warm up for the real thing to come in Sept Oct.
Most are probably going to be watching 1250 on the sp500 or slightly above that. This will be the key level to watch assuming we actually can get that high. We want to watch the market fail in that range and look for the next turn sign.
But for the next 10 to 15 trading days it looks like the bias is to the upside.