Commentary for August 15, 2007

| August 15, 2007

A month ago, we noted the development of a power uptrend on the monthly chart of the S&P 500 index that likely signaled the speculative blow-off phase of the cyclical uptrend from late 2002 and observed that a break below power uptrend support would be the first sign of meaningful technical weakness in the rally. We are now two weeks into August and the index has moved well below that power uptrend support level.

Since this is a monthly chart, we would require a monthly close below power uptrend support in order to confirm the breakdown, but the developing weakness appears to be significant at this point. The cyclical uptrend itself will remain in control as long as price action does not break below long-term uptrend support, currently at 1,375, so the power uptrend breakdown would be the first step of a potential topping process that could take several months to develop given the strong momentum supporting the rally. Watch the close at the end of August for this potentially important technical development.

Category: Commentary, Market Update

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