Squeezed on the left side of the chart you can see the initial Crash and the rally that followed it into mid-1930. That was a bear market rally, and it advanced about 50% from the Crash low. While all our current signals are bullish, I still have no problem imagining our current rally ultimately resolving in this manner. The point, however, is that the big rally in 1930 occurred at a time that the fundamental problems had hardly been acknowledged, let alone solved.

After the final low in 1932 the market rallied for over four years and 300% during what has to be characterized as the depths of the Depression. I do not mean to assert that this is what I expect from our current situation, only to demonstrate what can happen and how fundamentals can often be at odds with price movement.

Moving back to the present, let's take a look at a weekly-based chart of the S&P 500. As of Friday's close, the 17-EMA crossed up through the 43-EMA by a thin, thin, thin margin of 0.03. This is the approximate equivalent of a 50/200-EMA crossover on the daily-based chart, and it confirms the long-term (months to years) buy signal we got on August 11.

What bothers me on this chart is the ascending wedge pattern, which looks more ominous from a weekly perspective than it does from a daily view. It is hard for me to imagine this wedge resolving any way but downward. I cannot picture in my mind a congruous price pattern that could result from an upside breakout. Once a correction is completed, more sensible possibilities could emerge. I guess this opinion falls under the heading of "gut feeling", but it comes from a person who has looked at a lot of charts for a lot of years.

Bottom Line: Medium-term indicators are still quite overbought, and a correction would be the best way to clear this condition. Is entirely possible that we have seen the top of the rally/bull market, but medium- and long-term signals are positive, so I think the worst case we should expect for now is a correction. Our medium-term timing model will switch to neutral from buy if the S&P 500 daily 20-EMA crosses down through the 50-EMA.

Technical analysis is a windsock, not a crystal ball. Be prepared to adjust your tactics and strategy if conditions change.

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BIO: Carl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.