• Rally to mid September then retest lows
• Pre - Holiday light volume trade

The market is following my script (up into mid-September then down into late November). This rally may trade to higher price levels than most expect, so look for at least 1,500 on the cash S&P, 13,700 on the Dow Jones and a double top high of 2060 on the NDX (Nasdaq 100). The hedge funds and large speculators have on a record short position and the rally could really take off if they need to begin covering.

Trading volume on this rally has been light, but that is typical of pre–holiday markets. I expect next week’s volume to pick up on rising prices and then, the following week, experience a reversal and hard and fast move down. A pattern I have observed in the past is for post holiday trading volume to pick up as price moves one direction. This gives everyone confidence in the new direction and then as everyone is feeling confident the market reverses.

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Posted by Michael Chapman at 12:00 PM PDT