Wilshire 5000 Chart – August 21, 2009

I charted the Wilshire 5000 ($DWC) after the markets closed on Friday, August 21, 2009 when it closed at 10,552.27. The way I chart the broadest index for the U.S. equity market, I see that we are back at the top of the trading channel between the trend line of higher highs and higher lows.  The dip off of the early August highs only gave the DWC a little room to the upside to creep before meeting resistance again.  It still got there though as it continues to fight against moving back towards the lower trend lines of previous lows.

When I first charted DWC I could only see the likelihood that we were ready for another pullback.  While I see that as a higher probability I spied new trend lines forming.  I drew those with thinner lines and only go back about two months.  These thinner lines show that support was found in the first part of this past week and could now be worth watching in the coming days and weeks.  The upper trend line uses the past two months’ higher highs to project new resistance, above the longer trend lines.  This is a steeper trajectory which tends to mean it won’t last as long, but that leaves more room to the upside for gains.

The Williams %R indicator adds to this more bullish outlook as both the 14 and 28 day periods have moved back into solid overbought territory.  They can stay there for weeks at a time, continuing to show momentum the entire time.  I saw the 14 day indicator break below overbought six trading days ago and waited for the 28 day to show confirmation that the index was going to move lower.  That full break didn’t come and the markets recovered nicely from there.  We also saw the highest volume day on Friday for an accumulation (positive) day in more than a month.  Friday was options expiration day, so I’m taking it with a grain of salt for now, but think it’s worth mentioning.

Hidden in all of my trend line drawing are the 10, 20 and 50 day simple moving averages (sma).  The 50 sma hasn’t broken since July 14th.  A reversion to the mean could be in play for it to either move back up to catch up to the index as it moves sideways or it could fall.  Fighting against that theory is the 20 sma.  DWC closed below it for two days in a row, but couldn’t get the all important second confirmation day to keep it down.  At the same time, the large index moved above its 10 sma, which has been more of a small speed bump rather than much of a hurdle.  It’s another positive, but hasn’t proved its worth recently.

Overall I’m still staying more neutral than overly bullish or bearish.  I don’t see a clear cut path in either direction from here.  I’ll be watching the longer trend line of higher highs this week.  If DWC breaks above this line, I’ll turn my views more bullish overall, if continues to offer resistance I won’t actually turn bearish until I see the moving averages break for three days in a row and the Williams %R indicators break, together for two-three days.