Market Overview
The wave of profit-taking which occurred over the past 10 days was pretty much confined to the overbought tech sector which, by the end of the past week had pretty much stabilized. The DJIA essentially ignored the whole thing and went on to make a new all-time high. SPX, which includes many of the high flyers, underwent a consolidation/correction that appeared to be complete by Friday’s close. If so, it should now be ready to progress to its next target of about 2455. This projection was first determined by the congestion pattern established just above 2330, and it should be confirmed if we can resume the uptrend on Monday.
The market action of the past week has done nothing to change my original estimate that an intermediate top is near but still ahead of us. The Weekly chart continues to be in an uptrend with negative divergence displayed by its indicators. The same can be said for the daily trend. A positive opening on Monday morning would most likely trigger a buy signal on the hourly chart and generate another attempt at reaching the projection level mentioned above while, a the same time, extend the life span of the uptrend.
Analysis: (These Charts and subsequent ones courtesy of QCharts.com)
Daily chart
SPX continues to be confined to the second quartile of a large, intermediate (blue) channel which originated at 1810. The profit-taking of the past few days has created a consolidation pattern that can serve as a platform from which it can propel itself to a new high next week. This push should be limited to about 2355, complete the minor uptrend which started at 2353, and be followed by another minor corrrection. While it is possible that this will be the final high, it is more likely that there will be one more high after that.
There is another factor which has limited the upward reach of the index. A trend which started at 2084 formed another, less important (greenish) channel which concluded at 2400, but the correction which folowed was not able to make a significant exit out of that channel and, since April, price has gyrated within a small range around the bottom channel line.
