« Upper Bollinger Band (Weekly Chart) Set to Challenge Bullish Trend »

We are initiating a new 'Chart In Focus,' today.

The markets have had a good run, over the past couple of weeks. The Nasdaq-100 and the S&P-500 have even broken out of inverted head & shoulders patterns that are calling for a continuation in the rally; the patterns call for a further gain of 10% or so on the indices. These are no doubt good signs for the bulls. Furthermore, virtually all technical indicators on the daily charts point to the likelihood of further upside on the indices.

However, nothing comes easy it seems. As the markets have rallied, the upper Bollinger bands on the weekly charts have slowly but surely started to fall. The rate of descent has been rather rapid, so much so that the indices are now confronted with the bands.

S&P-500 Weekly Chart: Focus on upper Bollinger band.

Last week,  the upper bands were falling in the case of most indices and had started to flatten in the case of one or two. As of the start of this week, the good news for the bulls is that the bands have not fallen any futher and, in fact, have possibly started to rise. Now, it's all well and good that the bands are starting to point upwards as of the beginning of this week, but the true test is going to lie in whether or not, they close the week pointing upwards.

If so, the rally will still be intact. If, instead, the bands flatten out or start falling again (it will take a losing week, in order for this to happen), traders should consider the development to be a potentially ominous one. We'll be keeping an eye on these developments, so stay tuned for an update to the 'Chart In Focus.'

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