The S&P 500 index closed sharply higher last week, moving up to a new high for the oversold reaction from early August above congestion resistance in the 1,185 area. Technical indicators have been gradually strengthening during the last four weeks, although they remain moderately bearish overall on the weekly chart, favoring a continuation of the violent decline from July.
With respect to cycle analysis, the reaction from early August has struggled to rebound given the extremely oversold condition created by the long-term breakdown and the second Half Cycle High (NYSE:HCH) will likely occur sometime during the next two weeks.
The formation of the HCH near current levels would be a bearish development favoring a resumption of the downtrend from May, so it will be important to monitor market behavior closely during the next few weeks. We will identify the key developments as they occur in our daily commentary available to subscribers.
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