The Rally Continues or Does It?

July 25, 2006 · Print This Article

For the first time in over a month a rally was sustained. Does this mean the rally has legs? After struggling to gain any ground today the major indices moved substantially higher towards the end of the day only to give back a chunk of profits after the bell. Hopefully this is only a small step back in what looks like a decent set-up for a sustained rally. After Monday’s rally many were looking towards today to see if the rally would continue. Over the past month or so we have had three sharp moves to the upside only to give back everything and then some a few days later. So far the market has been able to move past some rather bearish historical precedents so this is certainly a positive for the market going forward, at least for the intermediate-term. If the market can maintain established support levels we could see another spike higher as we approach a seasonally bullish time year. The end of July/beginning of August is historically bullish so if the seasonal precedents come true this year we could see a nice move going forward. Certainly, the seasonal picture is falling in line with the current market environment so the probablity of a move higher increases slightly. For the short-term we are nearing overbought in the Dow and S&P so we could see a step back in the next day or two. If this does occur watch to see if the S&P can hold the 1260 level, if so the bulls should come out to play once again.

RSI Wilder (5) for July 25, 2006