Those August lows, will once again be another long term swing point (BUY), that should see the market stabilise and move upwards into a large consolidation pattern for the rest of 2011.
Previous Weekly report
S&P Primary and Monthly cycles
Last Week’s price action was exaggerated on the news of the credit downgrade in the US, but we completed the move into the August lows @ 1115 quicker than expected
Because of the downgrade and the subsequent move into the August lows, the price action has been in fast forward, and this gives a couple of conflicting patterns.
If it followed my original analysis and moved down into the August lows in the last week of the month and dipped slightly lower in September, then the upward reversal pattern would normally last for the next 2-3 months, as it follows the monthly cycles:- October and then into November's highs.
Weekly report continues below....
S&P Monthly and Weekly cycles
However, let me stick to the original analysis, and the expectation of a 3rd week rally.
The 3rd week is next week, and begins with price trading above the Primary support levels @ 1169/73, combined with price trading inside the Weekly range @ 1169.
A 3rd Week rally normally begins with a 3 day move, as part of retesting the previous Weekly breakout.
That previous breakout is 1271, but it might fail at the August 50% level @ 1245.
If that occurs, then traders should begin to look for shorts once again from Thursday onwards.
And if everything goes to plan, the market slowly unwinds and begins another downward leg into September lows.
Note;- the conflicting pattern won't be known until September begins, because the next monthly 50% level will decide whether the trend makes a move towards the September lows..
or actually forms support, and the market follows the 2-3 month upward move.
In the short-term:- if the market rallies upwards for the next 3-days and closes on its highs by Wednesday, then from Thursday onwards becomes interesting.
Trend guide 1169/1173
