Measuring the S&P 500 market including projections for what comes next,with Turning Points by Andre Gratian

Folks, here is Andre Gratian's weekend update of projections for the S&P 500. Since he pointed us to a rally instead of the bearish head-and-shoulders pattern, we might pay careful attention to his current projections and turning points analysis! Andre's website is Market Turning Points, and he normally offers a free 4-week trial period of daily comments if you contact him at ajg@cybertrails.com. Here's his update:
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July 27, 2009
Week-end Report
Turning Points
By Andre Gratian

In the last Week-end Report, I suggested that the rally might not be over and that there was some faint evidence that we were about to start another phase up. In fact, it turned out to be a very strong up-phase which has led to a new recovery high in both indices, primarily motivated by better than anticipated earnings. Positive earning reports are about to end, and so is the rally which is approaching the (slightly revised) projection that it was given: 990-1000. Since this is more visible on the hourly chart, let’s start with that one and move to the longer time frames later.

Here, we can see that prices have moved in an up-channel, the bottom line of which is drawn as a heavy black line. That line has already been tested twice with the last time coming on Friday. The bounce continued throughout the day bringing the index to a new recovery high close, but look at the indicators: they are telling us that we are either starting another up-move, or that we have non-confirmation and that we are making a top. Monday will tell us which it is.

If we continue to move up and manage to erase the divergence in the indicators, the uptrend is intact. But if we turn down, the trend line is only about 6 or 7 points away. Breaking it would create a top, but not necessarily the final top. There are higher counts and plenty of momentum.

Now let’s turn to the daily to see what this up-move represents in a longer perspective.


As the SPX is approaching its target area, one of the indicators is overbought and one of the other two shows negative divergence with the price still well above its moving averages and its trend line. At this time, a reversal is possible but there is no way to gauge its importance until we see the action of the market over the next week.

The 20-week cycle, which was supposed to bottom early next week, has had no effect on prices so far. It is too late for it to be much of a factor in the overall trend on the downside, although it could still bring about the short-term top and following decline that the hourly chart is suggesting.


As for the longer trend, prices have clearly broken out of the channel which has contained it since March, but it is very overbought and probably has limited upside potential in this condition.

Summary:
We are approaching the 990-1000 target that had been suggested for this phase. Since longer-term cycles are scheduled to roll over soon, we should begin to see some reluctance on the part of the indices to move much higher.

Andre