Stock Market --Technical

The rally which began at the turn of July is now into August. With 10
and 25 day m/avs moving up and the market holding above both,
there is reasonable confirmation of a short-intermediate term run.
The rally has been anything but smooth, with clear back and fill
that has allowed interested traders to reload. The market is getting
more heavily overbought short term, but it has so far weathered
prior quick overboughts during this run reasonably well.

The market has moved up to challenge intra-day resistance, and
since it is getting more overbought, there should be a challenge in
the days ahead. If the market motors through, then there is
another more formidable challenge up at 1130-35 on the SPX (1126
close today).

Since I thought the Apr. through Jun. sell off was a classic correction
I am working on the assumption that this rally is the initial phase
of an up-move that can run on into early 2011. I would also say
that this is clearly the minority view. Many traders see the rally
as a summer seasonal affair and some are saying it's just a
sucker rally. On top of this, the pundits will be out soon to warn
of the potential for a "hells bells" sell-off over Sept. - Oct.,
citing the many sell- offs that have occurred over the course of
history during the late summer - early autumn time slot. So, I
would imagine there are a reasonable number of players who plan
to show the current rally little respect.

SPX chart.