S&P Rally Losing its Mojo: Charts

The S&P 500 index is likely to continue trading higher, but investors should remain wary of the market, as it lacks distinct momentum, Chris Locke, managing director at Oystertrade.com Management, said.

"The trend is up and the action is good. But that momentum indication is warning me to be very wary of this market," Locke told CNBC Tuesday.

"Although this market can continue to move higher, if we took out the recent highs, we could see a move to the 50 percent of the bear retracement towards 1,120, (but) there is a distinct lack of momentum and I would expect eventually we'll have some more serious tests of these averages to the downside," he predicted.

Locke said he sees the rally as a "corrective move that has continued with a vengeance" from the lows met in March "right to current levels" and doesn't see the move as "sustainable once we enter 2010."

The corrective move should begin to end soon, he added.

"The (gold) market has made new highs," Locke said. "The market has broken up(wards) to me."

Gold prices hit record highs above $1,065 per ounce on Tuesday.

"We may be at a point where gold could move sideways through the month of October into November," he said. "We would still be high into the end of the year and 2010. This is a very bullish chart."

"Gold should at least be twice the value of the S&P," he said. "If the S&P just holds here, gold should move on to $2,000. If the S&P goes up to 1,500, I should think gold should move to $3,000. So this is extremely positive for gold. There may be a chance to buy on the next dip for the month of October."

"Euro-dollar trend remains up. Critical levels remain; we're just testing the recent highs. As long as we hold above $1.4480, the trend (will remain) up. If we break $1.4480, we will have some kind of consolidation where the dollar will trend higher and the euro back to $1.40," Locke said.