S and P 500 Weekly Chart

On March 7, we posted the Monthly chart of the S and P 500 and pointed out the slope of the market was unsustainable and that a rally was likely. From that article,

You can see the slope of the market is very severe. This cannot be sustained much longer. When a market index trades down at a sharp angle like the one above (See March 7 chart), the market always rallies sharply when it reverses directions. This rally could start at any time.

Since then, we had two weeks up in the market as shown in the weekly chart above.

Now the question is what next? Technically this is a difficult question to answer. I would say this week is fifty-fifty. As you can see, the downtrend is still intact. The market is now above the blue line which indicates the severe oversold condition is not over. Overall, it is always more risky to be a buyer when the trend of the market is down--so it is still a time to be very cautious. I would also so, at this point the easy money has already been made on the downside. Toss up.

My best guess right now is that market is going to continue to consolidate and move sideways in the area between 663 and 800 before it makes its next move. On the fundamental side, I will be posting a new article entitled, Don't Fight the Tape, which makes an argument for additional upside in the market.

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Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.