Weekly Market Review - January 18, 2009

After a steady decline for more than a week, Thursday and Friday's market action were marked by the dramatic V-shaped bounces on both days. From the hourly chart on Figure 1, we see that the end-of-day up volumes were strong for either day. In fact, the average volume has been increasing on this latest downtrend.

Over at the daily chart to the right of Figure 1, both the MACD and CO are holding above their zero-level and looks as though they've started to turn upward from those bounces.

However, it's interesting that we've closed just below the 850 pivot for this long weekend and prior to the Obama inauguration. So we aren't cleared of the water yet.

Next we look at the price pattern in Figure 2. Note that we have not closed below the 830 support since December 1st. On the other hand, we're about to test the 860-870 resistances. Those will be the levels to watch for a confirmation to this rally. If we can break 860-870 on the S&P500, then 930 will be my first target based on the channel in Figure 2.

However, if we break below 830, 750 will be the first target. Based on my indicators, I'd say we're more likely to see 930 first.

[caption id="attachment_1055" align="aligncenter" width="500" caption="S&P500 ETF"]S&P500 ETF[/caption]

[caption id="attachment_1056" align="aligncenter" width="500" caption="S&P500 ETF"]S&P500 ETF[/caption]