I really have not posted much lately because there has not been much to add. The market remains very weak from a technical perspective. Breadth and volume continue to deteriorate. Oscillator divergences that were present a month or two ago have only grown even more pronounced. There is really no reason to believe that the market is doing anything other than forming some sort of intermediate-term top. The only real question is how much higher will the market rally before beginning this correction.
I have to admit that I do not know. What seems absolutely certain, though, is that the S&P 500 will not begin any serious downward movement until it breaks below a trend-line that we have discussed previously. We broke below this level when I last posted, but the markets rallied sufficiently by the end of the week to close above this trend-line. We will need to close below the long-term trend-line formed by the highs of May 2006 and February 2007 to confirm the downward break.
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