Outlook September 27
Posted by Danny on September 27, 2010
Markets briefly paused last week, but still ended very strongly on Friday.
This has been one of the strongest Red Periods we have seen in a long time, with the Nasdaq adding 139 points.
So, clearly the path of least resistance is up for the moment.
You may remember what we wrote back in August on the topic of Cardinal Climax.
Indeed, two months after this event the stock markets are surging higher, apparently not stopping for anything.
As we suggested back then, if things can’t get any worse then it takes little or nothing for things to get better. That’s what we are seeing today.
Now the question becomes: how long will this continue? how high can this go?
We are now going into a new Green Period, so will we continue to rise even further?
Here is a longer term S&P 500 chart that can shed some light on the question (click for full size image):
As you can see we are moving up between a set of parallel trendlines, and the recent surge has only brought us to the upper boundary of it.
We are also approaching a major down trendline that comes off the 2007 highs.
So, major resistance is going to appear when the S&P500 index reaches the 1160-1170 zone.
And I think that’s what we are going to see in the next few weeks: another rally attempt, but no breakout yet. Next the market will have a much needed pull back into the end of October. That would set us up for a possible break higher in November-December.
Of course we will cover the further evolution here on the blog.
Stay tuned, Danny
LunaticTrader 
Yash said
Thanks Danny. So you see 1160-1170 in this green period but not much more than that .. if I read you correctly?
Danny said
What else are you reading in my post?
NICOLE said
DO you study dollar index? I hope in the future you can include forex market into the study, that’ll be very helpful for many people.
Danny said
Hi Nicole,
I do not follow the currency markets closely enough to give weekly comments on it.
I do give occasional longer term prognosis for the Euro-US$ on the Four Pillars Finance blog (see link in the right side menu bar)
Danny