Stock market will soon decide if it is half full or half empty

But we also cannot presume the market will simply catapult higher from current levels. Although the major indexes rallied within range of 2% last week, all stalled on the upside in the vicinity of defined 10-Day Price Channels (see Table below) and toward downtrend lines stretching back to the early May Intermediate Cycle highs. It’s also important to note that since the early August lows, the major indexes have staged no less than five recovery rallies (with the sixth now threatening on the upside) with all failing to sustain themselves with upside follow-through. Those failures highlight the fact that sellers have remained somewhat more eager to exit the market while buyers have been unable to sustain their buying. But imagine beach sand dunes that are eventually overcome by the battering waves of the ocean, or a military action in which one force gradually, but assuredly, gains the upper hand. In market parlance, the forces of supply and demand will likely favor those on the demand side after "Oversold" conditions take hold.

Daily S & P 500 Index with Cumulative Volume

Weekly S & P 500 Index with Cumulative Volume

While we will be able to confirm the point at which the trend shifts decidedly from Intermediate Cycle negative to positive, the next question will then become "how far will prices be able to carry?" In a best case bullish scenario, all of the losses since the May highs (1370.58—S&P 500) would be erased and the primary bull market begun in March 2009 would resume. Within that context, all of our key indicators would confirm such strength by also reversing and rallying to new highs. Or the market rallies to new highs, but our indicators fail to second that move.

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