David Fuller's view Price charts signal changes in investor perceptions which alter money flows.

A closer look at Wall Street

Looking first at daily charts, the DJIA (daily & weekly), S&P 500 (daily & weekly), Nasdaq 100 (daily & weekly) and Russell 200 (daily & weekly) broke up out of small trading ranges on 1st August. This signalled scope for higher levels, although we know that Wall Street is no longer cheap. We also know that the indices above are at least somewhat overextended relative to their 200-day moving averages (MAs).

That has not mattered to investors because monetary indicators remain extremely bullish. However, pressure to taper quantitative easing (QE) will increase as the US economy gradually recovers. There is a risk that this may be viewed by investors as winding down the stock market's 'sweet spot'. That could trigger a corrective phase, including at least mean reversion back to the MAs shown above. Technical signs of danger would be clear downward dynamics and sustained breaks beneath the small mid to late-July reaction lows.