By Decision Point:
STOCKS: Based upon a 3/1/2010 Thrust/Trend Model buy signal, our current intermediate-term market posture for the S&P 500 is bullish. The long-term component of the Trend Model is on a buy signal as of 8/11/2009.
On Wednesday the S&P 500 broke up and out of the short-term ascending wedge pattern on expanding volume. On Thursday there was a small follow through advance on expanding volume, but short-term internals showed weakness, and it looked to me as if a pullback toward the point of breakout was likely. Instead, the breakout was a fakeout, and prices fell through support all the way back to the short-term rising trend line. At this point no damage has been done to the technical picture on the daily chart.
I do have concerns when I look at the weekly chart. Prices are at the top of an ascending wedge formation, and a correction back to the rising trend line seems the most likely next move. Could be that today’s decline was the beginning of that correction.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.