Yearly 10 Year Bond Chart

Today I start a new series of charts on the US 10 year bond yield. There is only one notable feature on the yearly chart but it is impressive. Yields (loosely interest rates) have been falling for over 25 years! At this point there isn’t even a hint of divergence between RSI and price either. Tomorrow we will see what the quarterly chart says about this downtrend.

Technical Analysis of for longer-term positions:

Dollar Index: Out. (0.65 point loss after 1 trade). In bullish mode but at weekly chart resistance. Possibly a pullback/consolidation coming?
World Gold Index: Long from 1139.20 on 12/16/09. Still trying to hold TDST support at 1101.20. I am out on a close below that level.
Cash SP500: Out on a close below 1085.89.
10 yr Bond: Neutral, waiting for a signal.
CRB Index: Neutral. Has been consolidating since 10/21/09.

Daily Dollar Index

Although the longer-term (yearly, quarterly, monthly) charts of the dollar index are building towards a potential buy signal during the first quarter of 2010, the weekly chart is currently moving higher off of a perfected TD Buy setup that completed in late October. Initial targets on the weekly chart were at 78.09 and 78.36. Let’s take a look now at the daily chart.

The daily chart had a TD Sequential buy complete on November 9 with an associated risk level of 74.1. These signals should be given about 12/13 price bars to work out and in this case the low came 13 bars later. A TD Combo buy signal came in one day before the low. All of this price action occurred without the risk level being broken and with a TD Buy setup perfected and in place on the weekly chart. To top it off there was bullish divergence in the technical indicators here also.

For me personally the hardest part was sticking with this market as it went sideways and then dipped down into the late November low. I failed to stick with the long position despite the fact that the risk level had not been broken and have paid the opportunity cost as the dollar has rallied sharply since.

The trend turned bullish when the swing chart (orange line) turned upwards on December 15th at 76.83. This was confirmed as the primary trend on this time scale when two days later price punched through TDST resistance (dashed horizontal red line) at 77.05. Yesterday this market touched 78.14; which is the weekly medium moving average, and pulled back. There was also old resistance at 78.16.

With weekly price targets being hit we note that a down close tomorrow will cause bearish divergence between the RSI and Composite index. However, without an accompanying TD signal we would interpret any pullback as just that - a correction within a bull move.

Bottom line: The daily Dollar Index chart is bullish although a pullback or consolidation would be indicated with a lower close tomorrow. Such a correction would mesh with what has to happen before any buy signals are made on the long term charts (a need to end December below 78.15). It will be interesting to watch and see if this plays out.

Weekly Dollar Index Chart

Over the past few days we have built a picture of the dollar index that looked like a longer-term buy signal could come during the first quarter of 2010. But what about the healthy rally of late? How does that fit into the picture? Today’s analysis looks at the weekly chart of the US Dollar Index.

An unrelenting downtrend has been unfolding since the March 2009 rally high in the dollar. Note that this is when the equity markets bottomed and started an unrelenting rally. After breaking TDST support in May, which confirmed the primary trend on this time frame is bearish, we had a perfected TD Buy setup complete in late October. The risk level associated with this trade is at 73.97 and is shown on the chart as a horizontal dashed cyan line.

A four period time window should be allowed for a setup to play out. In this instance a bullish divergence between the RSI and Composite index appeared after the market reversed at the end of November, right at the end of the four bar period.

As an aside …. The above may be the key difference in the current daily chart of gold. We have a bullish RSI/Composite divergence but never formed a buy setup. We’ll have to see if that leads to a failed trade. Now back to the dollar.

How far should one expect the dollar to go on this move? Initial targets can always be found below current TDST resistance (which is at 78.94). Currently the medium moving average is at 78.09 and the TD Trend Factor target at 78.36. We need to monitor the daily chart action as we approach these targets.

Bottom line: The weekly chart indicates that, at a minimum, a significant counter-trend rally got underway in late November. Over the weekend I will look at the daily chart to see what kind of staying power this rally might have.

Technical Analysis of for longer-term positions:

Dollar Index: Out. (0.65 point loss after 1 trade). We were able to break through TDST resistance yesterday, as well as the TD Sell Setup risk level. Both events painfully reminding us that we got out of our long too soon. What caused this mistake will be explained in the next post.
World Gold Index: Long from 1139.20 on 12/16/09. Will 1101.20 hold as support? If not I am out on a close below that level.
Cash SP500: Out on a close below 1085.89.
10 yr Bond: Neutral, waiting for a signal.
CRB Index: Neutral. Has been consolidating since 10/21/09.

Monthly Dollar Index

After reviewing the quarterly chart of the Dollar yesterday it seemed that we needed one more decline from where we are now to fulfill the sequential countdown. Specifically, we can’t rally above 78.33 over the next two weeks (and close there) and then we must be back below 75.83 by March. We are at 76.87 today. How likely is such a price movement? A look at the monthly chart may help answer that question.

Within the context of the quarterly chart the rally in 2008 failed at TDST resistance. In the monthly chart the rally was able to rally above resistance and wipe the sequential slate clean. The decline from the March 2009 high has now persisted to the point where TD Setup bar #8 is about to print (as long as we close below 78.15 this month). To get a perfected buy setup this market would then have to drop to a new low and close below 76.72 in January.

And so, the monthly chart is confirming the quarterly chart in what has to happen before any buy signals are made. Combining the two we need to end December below 78.15 (which meets the quarterly requirement of 78.33) and then decline below 74.23 in the first quarter of 2010 while closing below 76.72 in January. Note that even if the monthly TD Buy Setup were perfected in January the reaction can take 1-4 bars to develop - and so it could mesh with a quarterly chart sequential buy.

Bottom line: Note that we are talking hypothetical price movement in order to reach longer term buy signals. Tomorrow I will look at the Weekly chart to see what the more near-term situation looks like.

Technical Analysis of for longer-term positions:

Dollar Index: Out. (0.65 point loss after 1 trade). We are hesitating just below resistance with a perfected TD Sell setup in place. If we can’t close above 77.05 quickly we are likely to see a pullback or consolidation develop.
World Gold Index: Long from 1139.20 on 12/16/09. 1101.20 appears to be holding as support. There wasn’t a TD Buy setup but there was an RSI/Composite buy signal with higher time frame charts bullish. Out on a close below 1101.20.
Cash SP500: Out on a close below 1085.89.
10 yr Bond: Neutral, waiting for a signal. It should be noted that the bond yield has punched through TDST resistance on the daily chart and so the bond itself is in a bearish trend. In fact, it may be ending the consolidation since June.
CRB Index: Neutral. Has been consolidating since 10/21/09 but TDST Support (266.74) seems to have held and we are now bouncing.

Quarterly Chart of the Dollar Index

Yesterday we saw that the US Dollar index was in a downtrend on the yearly chart from the 2001 high. On today’s quarterly chart you can see that a TD Sell setup was perfected at that high and that the swing index (orange line) has been making lower lows and lower highs since. Within the downtrend there were two brief bounces (2005 & 2008), both of which occurred after TD Buy Setups were made. The last bounce failed at TDST resistance (dashed red horizontal line)

Over the past year the dollar index has resumed its decline and is now quite close to its previous low and the completion of a TD Sequential buy countdown. If we close December below 78.33 we will have completed bar #12 of the required 13. We then need a close below 75.83 at the end of March 2010 to complete the sequence. Alert investors/traders will want to keep an eye on this, particularly if we get the yearly price/RSI divergence mentioned yesterday.

One take away from the above paragraph is that it seems we need one more decline from where we are now to fulfill the sequential countdown. That is, we can’t rally above 78.33 over the next two weeks (and close there) and then we must be back below 75.83 by March. We are at 76.93 today. How likely is such a price movement? Maybe a look at the monthly chart tomorrow will help answer that question.

Technical Analysis of for longer-term positions:

Dollar Index: Out. (0.65 point loss after 1 trade). We are at resistance now as a perfected TD Sell setup completes. If we can’t close above 77.05 today we may well see a pullback or consolidation develop.
World Gold Index: 1101.20 appears to be holding as support and we are close to making a TD Buy setup bar #9; but it would need a low less than 1110.20 to perfect. But with a RSI/Composite buy signal in place and higher time frame charts bullish: Long on a close above 1132.40.
Cash SP500: Out on a close below 1085.89.
10 yr Bond: Neutral, waiting for a signal. It should be noted that the bond yield has punched through TDST resistance on the daily chart and so the bond itself is in a bearish trend. In fact, it may be ending the consolidation since June.
CRB Index: Neutral. Has been consolidating since 10/21/09 but TDST Support (266.74) seems to have held and we are now bouncing.

Dollar Index Yearly Chart

Today I start a new series of charts on the US Dollar Index. The yearly chart doesn’t have much data and only offers a bit or two of information. The trend is clearly down from the 2001 high. More subtle is the possible bullish divergence developing between price and the RSI (top pane). We’ll have to check back at the end of the year to see if price makes a new closing low (below 76.62) while the RSI does not. If so then we may just possibly get a technical buy signal on this chart at the end of 2010. Tomorrow we will drop down to the quarterly chart.

Technical Analysis of for longer-term positions:

Dollar Index: Out. (0.65 point loss after 1 trade). If able to punch through 76.8-77.05 this will signal continued bullishness. Note that the dollar is strengthening as the bonds weaken.
World Gold Index: Long on a close above 1130.10. 1101.20 appears to be holding as support.
Cash SP500: Out on a close below 1085.89.
10 yr Bond: Neutral, waiting for a signal. It should be noted that the bond yield has punched through TDST resistance on the daily chart and so the bond itself is in a bearish trend.
CRB Index: Neutral. Has been consolidating since 10/21/09 but TDST Support (266.74) has been holding.

World Gold Index Daily Chart

So far we have reviewed all time frames of the World Gold Index except for the daily. The most striking fact is that every time frame is bullish!

The daily chart is different. After the consolidation ended in August this market has been in a strong rally with only a couple of minor pullbacks. When TD sequential reached bar #13 in mid-November price didn’t even bat an eye; we didn’t even get a consolidation. On 11/25/09 we hit TD Combo sell bar #13. This time we reached above, but never closed above, the risk level (1216.60) and then experienced a price flip that caused my system get out on the close of 12/4 at 1161.80.

With the higher time frames bullish this price activity on the daily chart should be considered a correction, and so the goal is to find a good spot to get back on the long side. Price is currently testing TDST support at 1101.20 and a potentially bullish divergence between the RSI and the Composite index has developed.

Bottom Line: With all the higher time frames of the world gold index being bullish there is an opportunity to get long on this pullback. The daily chart is close to a technical buy signal while just above support. Let's see what happens.

See yesterday’s post for current Technical Analysis of for longer-term positions.

Weekly World Gold Index

As explained over the past few days the yearly, quarterly and monthly charts of the world gold index are bullish. The earliest signal possible would be a new TD Setup on the monthly chart but we wouldn’t get to bar #9 until at least March 2010. Now its time to check out the weekly chart.

The displayed chart begins at the Autumn low of 2008. From there we rallied until February 2009 and then consolidated for six months before beginning yet another rally leg. On 9/4/09 we hit TD Sequential bar #13 but never experienced a price flip before reaching the risk level of 1078.10. A month ago (11/13/09) we hit TD Combo sell bar #13 but again reached the risk level (1150.80) before any action could be taken.

Even though this past week finally produced a price flip we can't do anything until the next setup forms. In fact, this week’s decline was so severe that it has produced a potential bullish reversal pattern in the RSI.

Bottom Line: Like all the higher time frames the world gold index is also bullish on a weekly basis. Tomorrow I will complete this sequence of gold charts with a look at the daily.

Technical Analysis of for longer-term positions:

Dollar Index: Out. (0.65 point loss after 1 trade). If able to punch through 76.8-77.05 this will signal continued bullishness. Note that the dollar is strengthening as the bonds weaken.
World Gold Index: Out at 1161.80 on the close of 12/4. Watching 1101.20 to see if support develops.
Cash SP500: Out on a close below 1085.89.
10 yr Bond: Neutral, waiting for a signal. It should be noted that the bond yield has punched through TDST resistance on the daily chart and so the bond itself is in a bearish trend.

Waiting for an initial signal on the CRB Index.

Monthly World Gold Index

Both the yearly and quarterly charts of the world gold index are bullish with possible TD Sell Signals at least a year away. The quarterly chart also points to the 1318-1347 area as a target to watch on the way up. What’s the monthly chart have to say?

As with the higher time frames on gold, this chart, as it stands, is bullish. The last TD Sequential signal was a sell in 2008. After a pullback that bottomed in the autumn of that year price has moved steadily higher. We are now working on a new TD Setup but need at least until March 2010 to get to bar #9. Of some interest is the price cluster just above the market from 1238-1255. The Fib ratio shown is based on the 2008 pullback.

Bottom Line: No reason here not to be bullish on the gold. Over the weekend I will take a look at this market’s weekly chart.

Technical Analysis of Chart positions for longer-term positions:

Dollar Index: Out. (0.65 point loss after 1 trade). If able to punch through 76.8-77.05 this will signal continued bullishness.
World Gold Index: Out since 1161.80 on the close of 12/4. Watching 1101.20 to see if support develops.
Cash SP500: Out on a close below 1083.74.

Waiting for initial signals on the following charts: 10 yr Bond Yield and the CRB Index

Gold Quarterly

The yearly chart of the world gold index is bullish with a possible TD Sell Setup scheduled for the end of 2010. How does the quarterly chart fit into this scenario?

The rally is to the point where we are well along in TD Sequential countdown. This quarter’s price bar will be bar #9. Since it takes 13 bars to complete, the earliest we can see a sequential sell is in four quarters from now - and this matches what the yearly chart is telling us. In the third quarter of 2009 the market broke out above the TD Supply line and confirmed that break this quarter. The calculated price projection is 1318.21. This is higher than the targets mentioned yesterday and is closer to a TD Trend Factor target of 1346.98. 1321 is square the low of 1999 and so 1318-1347 is a target area to watch on the way up.

Bottom line: Both the yearly and quarterly charts are bullish. Tomorrow I will take a look at this market’s monthly chart.

Technical Analysis of Chart positions for longer-term positions:

Dollar Index: Out. (0.65 point loss after 1 trade). If able to punch through 76.8-77.05 this will signal continued bullishness.
World Gold Index: Out since 1161.80 on the close of 12/4. Watching 1101.20 to see if support develops.
Cash SP500: Out on a close below 1083.74.

Waiting for initial signals on the following charts: 10 yr Bond Yield and the CRB Index.

Gold Yearly

Today starts a new approach here at Fox Market View. We will move away from focusing on the cash S&P500 and begin to view other markets and other time frames. The plan is to rotate through each in sequence (including the S&P) but I will be flexible. I‘ve decided to start with the world gold index.

Today‘s chart is on a yearly time scale. As everyone knows we have been in a powerful rally for years and this chart remains bullish. However, be aware that 2010 will most likely see TD Setup bar #9 printed. If this is the case, and since setup has already been perfected, the yearly chart will signal that at least a correction may be due on this time frame. But that is in the future. This chart, as it stands, is bullish. The targets shown are derived from TD Trend Factor (purple) and Gann (grey). Tomorrow I will take a look at this market’s quarterly chart.

Technical Analysis of Chart positions for longer-term positions:

Dollar Index: Out. (0.65 point loss after 1 trade). Darn! Looks like I closed this long too early! If able to punch through 76.8-77.05 this will signal continued bullishness.
World Gold Index: Out since the 1161.80 close on 12/4. Watching 1101.20 to see if support develops.
Cash SP500. Out on a close below 1083.74.

Waiting for initial signals on the following charts: 10 yr Bond Yield and the CRB Index

A Late Posting

Just when intraday volatility seemed to be rising along comes a quiet “inside” day on the cash S&P500. Once again this price action has done little to change the price pulse picture presented Friday. The bulls need to hold 1083.74 since a break of that level could start a cascade down.

Note the horizontal dashed cyan line at 1113.86. This is where the sequential stop-loss would be if the setup had not been recycled. I find it interesting that we are struggling to close above it and have not been able to do so for a full month since sequential bar 13 of November 9. I will continue to watch to see whether this line gets broken before 1083.74.

Note: This blog will slowly be changing its format over the coming months. Since I am focused on longer-term positions it seems to make more sense to look at the different markets and time frames than solely the cash S&P500. Watch for more of this same kind of technical work on the dollar index, world gold index, CRB and 10 year bond yield.

Technical Analysis of Chart positions for longer-term positions:
Dollar Index: Out. (0.65 point loss after 1 trade). Darn! Looks like I closed this long too early!
World Gold Index: Out since the 1161.80 close on 12/4.

Waiting for initial signals on the following charts: 10 yr Bond Yield,
Cash SP500 and the CRB Index

1083.74

Intraday volatility has certainly increased as evidenced by rare back-to-back “outside” days in the cash S&P500. This price action has done little to change the price pulse picture presented Friday. The bulls need 1083.74 to hold since my read of the pulses is that a break of that level could start a cascade down. Note that the medium moving average (dark blue) resides near this level.

Bottom Line: For those Longer-term traders/investors who are not already long I think risk is too high here to be long and so would sit tight. Anyone who is long should protect at 1083.74.

Technical Analysis of Chart positions for longer-term positions:
Dollar Index: Out. (0.65 point loss after 1 trade). Darn! Looks like I closed this long too early!
World Gold Index: Out since the 1161.80 close on 12/4.

Waiting for initial signals on the following charts: 10 yr Bond Yield,
Cash SP500 and the CRB Index

Weekly Chart Review, December 6, 2009

Earlier this week a review of the monthly chart indicated that any move above the November high would signal a continued advance to at least the next TD Trend Factor target of 1145.47 if not the higher long and medium moving averages (1168 and 1195). Even though the price action has been sideways and volatile this past week we did move above the November high; which also confirmed the break of the old weekly TD Trend Factor target of 1079.39. The new weekly chart target is 1139.40.

With a closing price of 1106 on Friday, these targets are 39-90 points away. If reached they would represent a 3.5% to 8% gain from current levels. However; the longer term risk is high and so my position has been that if now long the “get out” point would be on a move below 1083.74. For those Longer-term traders/investors who are currently out of the equities I think longer-term risk is too high here to chase what could be the last part of the rally. This includes me personally and I continue to sit tight, having gotten out in early October.

Why do I think risk is high? Although we made an up trending (higher high and higher low) price bar on the weekly chart it doesn‘t inspire bullish confidence. Yes, It was an Engulfing Bullish Pattern candlestick; but, when this occurs in an uptrend (like we have now), it may be a ’last engulfing top’. This would be the indicated case if we were to close lower next week. This makes sense since a down close next week would lead to more bearish divergence between price and the RSI. 1083.74 continues to be a very important level for the bulls to hold.

That being said I must admit that against this bearishness we keep making higher highs and that the DeMark indicators have not signaled exhaustion of the up trend. The end result of this tension has been a sideways movement over the past few weeks.

Price Pulse Update

Yesterday was an “outside” day in the cash S&P500. Today is jobs report day. Although we still have the overhead targets discussed yesterday, I would like to update the price pulses quickly for you as we end the week:

Level 1: We are in a Beta pulse down. Weakness would be signaled on a move below 1083.74.

Level 2: In an Alpha pulse up. Beta underway with an “early warning” of a turn to bearish conditions on a break of 1083.74.

Level 3: Also in an Alpha pulse up. A warning of bearish conditions would be signaled on a break of 1050.65 (upper trendline; see chart).

Level 4: In a Delta pulse up. A break of 1029.38 would be bearish.

The bulls should hope that 1083.74 holds. If my read of the pulses is correct a break of that level could start a cascade down. However, I do expect it to hold if only because the weekly DeMark indicators have not signaled a “sell” yet. But, for those Longer-term traders/investors who are not already long I think risk is too high here and so would sit tight.

Technical Analysis of Chart positions for longer-term positions:
Dollar Index: Out. (0.65 point loss after 1 trade).
World Gold Index: Out on a close below 1179.20.

Waiting for initial signals on the following charts: 10 yr Bond Yield,
Cash SP500 and the CRB Index.

Inching Ahead

It was an up trending day in the cash S&P500 on Wednesday. Although we didn’t make much headway it was enough to confirm the recent break of the daily TD Supply Line. The associated target price is 1135.02 while the weekly TD Trend Factor target is 1139.40 and the monthly TD Trend Factor target is 1145.47.

Bottom Line: If now long on a short-term speculative basis you should know that the price pulses turn negative on a move below 1083.74. For those Longer-term traders/investors who are not long already I think longer-term risk is too high here to do so now.

*NEW* Technical Analysis of Chart positions for longer-term positions:
Dollar Index: Out. (0.65 point loss after 1 trade).
World Gold Index: Out on a close below 1177.80.

Waiting for initial signals on the following charts: 10 yr Bond Yield,
Cash SP500 and the CRB Index.

Long Term Investors Should Not Jump In Now

It was an up trending day in the cash S&P500 yesterday. Overall we have now moved sideways for 2 weeks in response to the perfected TD Sell Setup on November 17.

Yesterday we saw that the monthly chart indicated that any move above the November high would signal a continued advance to at least the next TD Trend Factor target of 1145.47 if not the higher long and medium moving averages (1168 and 1195). Such a move would also confirm the break of the weekly TD Trend Factor target of 1079.39 and qualify a break of the weekly TD Supply Line. And so a continued upward move here looks like a continuation move in the bull market. The big question is whether a longer-term trader/investor buys it or not.

Bottom Line: Still neutral but traders might consider taking a short-term speculative long position on a break of 1113.69 with a tight stop. For those interested in the Longer-term (including moi) I think risk is too high here and so I would sit tight.

*NEW* Technical Analysis of Chart positions for longer-term positions:
Dollar Index: Out. (0.65 point loss after 1 trade).
World Gold Index: Out on a close below 1190.5.

Waiting for initial signals on the following charts: 10 yr Bond Yield,
Cash SP500 and the CRB Index.

Monthly Chart Considered

The market stabilized yesterday with an “inside” price bar (both the high and low within the range of the previous bar) and is up strongly pre-market this morning (at 1000GMT).

A quick review of the monthly chart is due as we begin December. In the last few monthly reports I have been watching technical indicators to get an indication on whether the rally from March is complete. The first is the TD Demand Line (upward sloping dashed green line). The qualified break in October was not confirmed in November. The supply & demand lines do not indicate the rally is over as demand enters the market on every pullback on this time frame.

The second indicator is the TD REI oscillator (bottom pane). A sell signal was not generated in November since 1019.95 was not broken. Now, even though the oscillator has not persisted in overbought territory long enough to indicate that a persistent uptrend has been established, the higher monthly close rules out a sell signal from this indicator in December.

Finally, there is no sell signal between price and the RSI or between the RSI and Composite Index.

In summary, the monthly chart indicates that any move above the November high will signal a continued advance to at least the next TD Trend Factor target of 1145.47 if not the higher long and medium moving averages (green and blue lines).

Bottom Line: Still neutral but willing to consider a short-term long position if we either fail to make a new high and then continue the pullback OR if we qualify and confirm a break out above 1110.

*NEW* Technical Analysis of Chart positions for longer-term positions:
Dollar Index: Out. (0.65 point loss).
World Gold Index: Out on a close below 1169.40.

Waiting for initial signals on the following charts: 10 yr Bond Yield,
Cash SP500 and the CRB Index.

Short Term (at Least) Weakness Indicated

To catch up …. Last Wednesday I said that “Odds favor the view that a short-term price pulse high was made yesterday and that risk is to the downside until December 2. The positive reversal in the RSI has an open upward price projection of 1114.46. I will be watching closely to see whether it gets filled or not because a failure would have longer-term bearish implications.“ As we know the cash S&P500 declined sharply on Friday. This caused the RSI reversal to fail, and so at first blush it seems that continued weakness is likely over the near term.

It appears that near term weakness is also indicated by the weekly chart as well as we failed to confirm the upside breaks above both the TD Trend Factor target and the TD Supply Line. This leaves the weekly chart with continued bearish RSI/price divergence, and an open downside price projection of 987.51. On the daily chart, more modest (and closer) targets include 1081-1083. This area is important because a move below 1083.74 today will confirm the TD Demand Line break and project a downside target of 1060.25. Note that this is where the 61.8% Fib retracement is. Below that we have previous TDST support and the long moving average at the 1047-1050 area.

Bottom Line: Still neutral but might be willing to consider a short-term long position if we continue to pullback during this week. I will be watching the action at the downside targets of 1081-83; 1060-62; and 1047-50.

*NEW* Technical Analysis of Chart positions for longer-term positions:
Dollar Index: Out. (0.65 point loss).
World Gold Index: Out on a close below 1164.00.

Waiting for initial signals on the following charts: 10 yr Bond Yield,
Cash SP500 and the CRB Index.

We Bide Time With an Inside Day

The cash S&P500 bided its time yesterday by forming an “inside” price bar. As there was no follow through from Monday we failed to confirm the break above the TD Supply Line. Odds favor the view that a short-term price pulse high was made Monday and that risk is to the downside until December 2. The positive reversal in the RSI has an open upward price projection of 1114.46. I will be watching closely to see whether it gets filled or not because a failure would have longer-term bearish implications.

Bottom Line: Still neutral but willing to consider a short-term long position if we do in fact pullback into next week. Otherwise I am willing to consider turning bullish on a close above the November 16 high.

I don’t plan on posting over the holiday weekend (Thanksgiving in U.S.). Next post on Monday morning. Cheers.

*NEW* Technical Analysis of Chart positions for longer-term positions:
Dollar Index: Long from 75.32; stop 74.67 (weekly chart on perfected buy setup). Time is running out for this market to move; stops tightened.
World Gold Index: Yesterday’s price action negates the view presented yesterday.

Waiting for initial signals on the following charts: 10 yr Bond Yield,
Cash SP500 and the CRB Index.

Now we Need to See Some Follow Through

The market gapped higher by a remarkable amount yesterday, rallied to almost a new high and then fell back towards the close. It was enough to qualify a break of the TD Supply Line. Now the bulls need to produce some follow through. If they can’t then the odds would favor the view that a short-term price pulse high is in and the market has entered a decline which should complete by December 2.

Also of note was that yesterday’s rally did create a positive reversal in the RSI. The upward price projection is 1114.46. Let’s watch and see whether it gets filled or not because a failure would have longer-term bearish implications.

Bottom Line: Still neutral but willing to consider a short-term long position if we do in fact continue to pullback from yesterday’s high. Otherwise I am also willing to go consider turning bullish on a close above the November 16 high.

*NEW* Technical Analysis of Chart positions for longer-term positions:

Dollar Index: Long from 75.32; stop 74.10 (weekly chart on perfected buy setup).
World Gold Index: Would close longs on a close below 1145.40.

Waiting for initial signals on the following charts: 10 yr Bond Yield,
Cash SP500 and the CRB Index.

Will the Next Push Up Fail?

Yesterday I ended the analysis of the weekly chart by stating “Perhaps the best interpretation is that although one can’t claim the rally from March is ending there is concern of a decent pullback.“ This is reflected in the daily chart with a decline in the cash S&P500 over the last few sessions responding to the perfected TD Setup of 11/17. On Friday we finally got a price “flip” (close less than the close four sessions earlier) to confirm that the pullback is underway.

But how long will it last? Friday’s price bar did hold the short moving average and, if it marked a short-term low, a price pulse high is due over the next two sessions. However, because of the higher level price pulse configurations I believe that this push up will fail and be followed by another decline which completes by December 2. That pullback may be worth buying.

Bottom Line: Still neutral but willing to consider a short-term long position if we rally here and then pullback again. Otherwise, if wrong in my call for a failure, I will also consider buying a breakout above the November 16 high.

*NEW* Technical Analysis of Chart positions for longer-term positions:

Dollar Index: Long from 75.32; stop 74.10; weekly chart on perfected buy setup.

Waiting for initial signals on the following charts: Gold Index,10 yr Bond Yield,
Cash SP500 and the CRB Index.

Weekly Chart Review, November 22, 2009

Although we made an up trending (higher high and higher low) price bar on the weekly chart of the cash S&P500 it doesn't inspire much bullish confidence. It was a spinning top candlestick with a long upper shadow. When seen at price highs these are indications that the trend may be stalling. Additionally, we made a bearish divergence between price and the RSI. However, against this bearishness we must admit that we keep making higher highs and that the DeMark indicators have not signaled exhaustion of the up trend.

We opened above both the TD Trend Factor target of 1079 and the TD Supply Line (down sloping dashed red line) and then had some follow through on Tuesday which qualifies the breaks. We now need a new high this coming week to confirm them. A failure to confirm will leave us with failure at the TD Trend Factor target, continued bearish RSI/price divergence, and an open downside price projection of 987.51, which is below the critical monthly chart value of 1019.95. 987.51 also coincides with a 50% retracement of the move from the TDST support line and is where the medium moving average is headed.

Bottom Line: This week’s closing price is only 3.7 points above where it was five weeks ago. What does the weekly chart say about this (essentially) sideways moving price action? Not much. Perhaps the best interpretation is that although one can’t claim the rally from March is ending there is concern of a decent pullback (987 area). I will explore what the daily chart “thinks” of this possibility tomorrow.

Expecting a Recycle

The cash S&P500 formed a down trending price bar yesterday as we pullback in response to the perfected TD Setup of 11/17. I am waiting to see whether we get a price “flip” (close less than the close four sessions earlier) before the TD Setup count reaches the 161.8% level (about 1128). If so then the TD Combo “sell” signal will be canceled (recycled) rather than just postponed. This will happen on a close below 1109.30 today.

Bottom Line: Still neutral but willing to consider buying on a pullback if Combo gets recycled. I am thinking (based on price pulse structure) that general weakness may prevail until after the Thanksgiving holiday.

*NEW* Technical Analysis of Chart positions:
Dollar Index: Long from 75.32; stop 74.10; weekly chart on perfected buy setup.
Waiting for initial signals on the following charts: Gold Index,10 yr Bond Yield,
Cash SP500 and the CRB Index.

Expecting a Pullback

With a small range, up trending day yesterday the situation is little changed from Wednesday. I am waiting to see whether we get a price “flip” (close less than the close four sessions earlier) before the TD Setup count reaches the 161.8% level (about 1128). If so then the TD Combo “sell” signal will be canceled rather than just postponed.

I suspect that the signal will end up being canceled since oftentimes a pullback begins within 1-4 sessions of completing a perfected setup (which occurred on Monday). Also note that yesterday’s small decline was enough for the RSI to make bearish divergence with price, as did the Derivative Oscillator. The RSI also bearishly diverged with the Composite Index.

Bottom Line: Still neutral but willing to consider buying on a pullback. I am thinking (based on price pulse structure) that general weakness may prevail until after the Thanksgiving holiday.

*NEW* Technical Analysis of Chart positions:
Dollar Index: Long from 75.32; stop 74.10; weekly chart on perfected buy setup.
Waiting for initial signals on the following charts: Gold Index,10 yr Bond Yield,
Cash SP500 and the CRB Index.

Now What?

Even though it was only an “inside” day on the cash S&P500 it was enough to cancel the pending TD Sequential “sell” signal. With a new TD sell Setup in place it also prevents the combo “sell” from executing. So now do I turn bullish? No.

For starters, if price were to extend the setup without a price flip so that the 161.8% level was reached the TD Combo signal would be back on. Additionally, even if the sequential were to recycle here there is still the fact that oftentimes a pullback is experienced within 1-4 sessions of completing a perfected setup. Also note that we failed to move above Monday’s high and so we failed to confirm the TD supply line break. Also still of importance:

* The RSI would make yet another bearish divergence with price on a pullback today. So would the Derivative Oscillator and the RSI would also bearishly diverge with the Composite Index.

* A Sequential “buy” has been triggered on the dollar index which is important because the dollar index and equities have been moving in opposite directions since March. The index had an up trending day yesterday.

Bottom Line: I will remain neutral but willing to consider buying on a pullback.

*NEW* Technical Analysis of Chart positions:
Dollar Index: Long from 75.32; stop 74.10; weekly chart on perfected buy setup.
Gold Index: Neutral.
10 yr Bond Yield: Neutral.
Cash SP500: Neutral.
CRB Index: Neutral.

Decision Day

One rally day complete. Can the bulls do it one more time? Today the “magic” number is 1098.51. A close below that number and the TD Sequential “sell” signal is triggered. Close above it and we have a new TD Setup, which cancels the pending sequential “sell” signal and prevents us from reaching a combo “sell” (today is #13). Beyond that, a move above yesterday’s high would confirm the TD supply line break of yesterday and of course would also be bullish.

And so the door is still open to a possible Tuesday reversal. Do the bulls have to slam it shut? What other non-bullish factors may come into play?

* The RSI would make yet another bearish divergence with price on a pullback today. So would the Derivative Oscillator and the RSI would also bearishly diverge with the Composite Index.

* A Sequential “buy” has been triggered on the dollar index which is important because the dollar index and equities have been moving in opposite directions since March. Unless the index trades below 74.10 there are still reasons on why the equities are topping here.

Bottom Line: I have been neutral since October 9th and remain that way now while waiting for resolution of the Sequential signal; which will come today. If it gets canceled (for reasons explained above) I am willing to consider getting bullish.

Hmmmm.... Still Waiting on the Sequential

As outlined yesterday the weekly chart leans to the bulls being back in the driver's seat if they can continue this rally over the next two days. What does the daily chart have to say about this?

First off, two nice up trending days would most likely result in a new TD Setup, which would cancel the pending sequential “sell” signal and prevent us from reaching a combo “sell”. Such a rally would also likely break, qualify, and confirm the overhead supply line; which is bullish. So yes, a bullish Monday and Tuesday would confirm the weekly chart’s rosy outlook for the next few weeks.

But what if we don’t get a strong couple of days to start the week? The morning futures are strong but what if, for instance, the retail sales numbers disappoint this morning? The first thing to note from the chart is that unless we open above 1098.78 on the cash S&P500 we will make a qualified break of the TD Demand Lines (upward sloping dashed green line). This would, even if we have a bullish Monday, keep the door open to a possible Tuesday reversal. What other non-bullish factors may come into play?

* TD Sequential signal on 11/9. To execute this signal we have been waiting for confirmation. We almost got it on Friday (needed a close below 1093.08 but we closed at 1093.48!) Today we would have to close below 1093.01. The stop level with this even would be at 1121.95
* The RSI has recently formed bearish divergence with price.
* Finally, the Sequential “buy” was triggered on the dollar index which is important because the dollar index and equities have been moving in opposite directions since March. Unless the index trades below 74.10 there is reason to believe the equities are topping here.

Bottom Line: I have been neutral since October 9th and remain that way now while waiting for resolution of the Sequential signal. If it gets canceled (for reasons explained above) I am willing to get bullish or at least remain neutral. I won‘t fight the weekly chart.

Weekly Chart Review, November 15, 2009

Well that didn’t last long. After just two down trending weeks we are back to having an up trending price bar to examine. The positive reversal noted in the RSI last week had a projection up to 1098.66 which was filled. This means that the bull lives on; which was confirmed with a new rally high. We also broke through the TD Trend Factor target of 1079 and the TD Supply Line (down sloping dashed red line). Neither of these breaks were qualified but we will most likely open above both lines Monday morning fulfilling the qualification criterion. So where does that leave us?

To confirm the break of both lines on Monday will require (at least) follow through on Tuesday by means of a higher high. That is the challenge for the bulls as we start the new week. A failure on their part will leave us with failure at the TD Trend Factor target, continued bearish RSI/price divergence, and an open downside price projection of 987.51, which is below the critical monthly chart value of 1019.95. 987.51 also coincides with a 50% retracement of the move from the TDST support line.

If the bulls are successful then the door is open to continue the charge upwards. Perhaps 1145-95 and completion of a TD Combo (we are on bar #10 now)?

Tomorrow I will merge the daily chart work with this weekly chart posting since it's emphasis is on what happens Monday and Tuesday. Enjoy the rest of the weekend!

On the Verge of Turning Bearish

The cash S&P500 switched course and formed a down trending price bar yesterday. Let’s look at the evidence for claiming that a top is being made.

1) TD Sequential signal on 11/9. The stop level with that signal is at 1121.95. The most conservative action continues to be to wait for confirmation of a sell-off which now means a close below the signal day close of 1093.08.

2) The Level 1 Alpha pulse ran from the 11/10 low to the 11/11 high. Since Beta has broken below the 11/10 low the odds are high that a turning point is in.

3) The RSI has just formed bearish divergence with price.

4) A complete zigzag pattern has unfolded from the March low.

Bottom Line: No change. I have been neutral since October 9th and remain that way now while waiting for resolution of the Sequential signal, which may come today. Also note that the pending Sequential “buy” on the dollar index will be triggered today unless we close below 75.06. This is important because the dollar index and equities have been moving in opposite directions since March.

New Rally High

The cash S&P500 reached a new rally high on an up trending price bar Wednesday. It continues to be prudent to wait for more definitive proof that a top is in before acting on the active sequential “sell” signal. The stop level with that signal is at 1121.95. The most conservative action continues to be to wait for confirmation of a sell-off which now means a break below the 1069.30 level, which is just above where the medium (blue) moving average will be today.

With a new high made and the Level 1 price pulses showing the trend as up, when will I give up this topping notion? If the stop is violated or perhaps if we reach nine consecutive positive setup days. Yesterday was setup day five. On the flip side … if the RSI turns down here we will get a “sell“ signal with that indicator. If we get another up trending day with a higher close we will see a TD Combo “sell“ generated.

Bottom Line: No change. I have been neutral since October 9th and remain that way now while waiting for resolution of the Sequential signal. Hopeful equity bears should note that the pending Sequential “buy” on the dollar index is in danger of being extinguished if we get consecutive down setup days today and Friday - that would help the equity bullish case.

Waiting (Patiently)

Unlike Monday there was not a lot of net price movement but it was yet another up trending price bar on the daily chart of the cash S&P500. And there is not much to add except for the fact that the swing chart (orange line) has turned back up without showing a trend change.

The TD Sequential is on a “sell” signal with the stop level at 1121.95. The most conservative action is to await confirmation of a sell-off using the level of 1066.63, which is just above the short and medium moving averages. Note that if the market does make a higher high today then the Level 1 price pulses will join the swing chart as showing the trend as up. So like yesterday … it is important not to jump the gun on a trend change.

Bottom Line: No change. I have been neutral since October 9th and remain that way now while waiting for more definitive proof that a top is in before acting on the new sequential signal.

Ok, So Bar 13 Is In. What Now?

There is no denying that we had another strongly bullish day and another up trending price bar on the daily chart of the cash S&P500. But it was also bar #13 in the TD Sequential Countdown process! If one were to entertain the notion of selling into strength here, the first point to note is the stop level at 1121.95. With that rather wide stop in mind, the most aggressive move is to act on the fact that bar thirteen is in. The most conservative action is to await confirmation of a sell-off using the level of 1046.50. If the market is set to turn down I would expect the high to come in no later than today. Anything later than that and the Level 1 price pulses will be showing the trend as up.

Another way to watch this action is through the Dollar Index. It has been moving inverse to the s&p’s since March and just made its own Sequential bar #13 countdown for a buy signal yesterday. There is also a fairly wide stop for this market too however (74.1), so it is important to not jump the gun on a trend change.

Bottom Line: I have been short-term neutral since October 9th and remain that way now while waiting for more definitive proof that a top is in before acting on the new sequential signal.

Looking For #13

We ended last week with an up trending price bar on the daily chart of the cash S&P500 and remain on bar #12 in the TD Sequential Countdown process. Now that we’ve met the price target of 1068.03 associated with the TD Supply Line break, the only overhead resistance left is the Fibonacci retracement line at 1074.

One item I continue to watch here with interest is the Dollar Index. It has been moving inverse to the s&p’s since March. The Dollar index also remains on a Sequential bar #12 countdown; but, unlike the equity market it is for a buy signal. For today, to make their respective bar #13, the dollar index must close below 75.51 but not trade below 74.9. For the cash S&P500 we need to trade above 1073.19 and close above 1066.65.

Bottom Line: I have been short-term neutral since October 9th and remain that way now while waiting to see if we get a sequential signal here. I will not consider going to a long-term bearish stance unless 1019.95 is violated.

Weekly Chart Review, November 8, 2009

After 16 consecutive weeks of closing higher than the close four weeks ago the streak has ended. What does this mean? Nothing in itself, but its a symptom of weakness from events that have been covered here previously: Failure at the TD Trend Factor target of 1079, bearish RSI/price divergence, and a qualified break of the TD Demand Line last week. That break was confirmed this week and has an open projection with it of 987.51, which is below the critical monthly chart value of 1019.95. 987.51 also coincides with a 50% retracement of the move from the TDST support line.

Work on the monthly chart indicates that if 1019.95 is broken the bears will have the upper hand with an initial downside objective between 910 and 940. This zone complements the conclusion from two weeks ago when I wrote “At this point … there are no TD signals on the weekly chart. This would infer that any decline would hold above previous TDST support at 875.“

Besides 987.51, another downside target would be the medium moving average (solid blue line) which should be at about 970 next week. Below that come targets derived from the monthly charts. We should keep an eye on the market action to see how price reacts if and when it reaches the laid out targets.

Finally, there is a positive reversal in the RSI here which projects up to 1098.66. This is important because of the rule that positive reversals only verify in bull markets. A failure of the current bounce to make the target is bearish. It would be a failed retest of the high.

Jobs Report Day! Sequential 13 Day?

In no way would I be long here. That is what I said yesterday and I still mean it. I am not a day or short-term trader and so yesterday’s strong rally did not cause me angst. I remain neutral with an eye towards taking a bearish view.

Yesterday’s up trending price bar on the daily chart of the cash S&P500 made it through the two resistance levels I had been watching. It also was bar #12 in the TD Sequential Countdown process. Since we had a higher high yesterday the break of the daily TD Supply line (down sloping red dashed line) was confirmed with a price target of 1068.03 which we almost made yesterday.

No doubt today will be interesting; particularly with the much anticipated jobs report due out this morning. One item I am watching with interest is the Dollar Index. It has been moving inverse to the s&p’s since March. Now the Dollar index is on a Sequential bar #12 buy countdown while the equity market is on a bar #12 sell countdown! Coincidence? For today, to make their respective bar #13, the dollar index must trade below 75.50 (but not 74.9) and close below 76.07. For the cash S&P500 we need to trade above 1073.19 and close above 1061.00.

Bottom Line: I have been short-term neutral since October 9th and remain that way now; Waiting to see if we get a sequential signal here. I will not consider going to a long-term bearish stance unless 1019.95 is violated. 1019.95 comes from the monthly chart discussion posted last Saturday. It showed that if 1019.95 is broken the bears will have the upper hand with an initial downside objective between 910 and 940.

Has the Bounce Ended With A Doji?

It was a nice strong day until the last hour or so. The sell-off that ensued still left us with an up trending day on the daily chart of the cash S&P500, but it was not convincing. Candlestick-wise it looks like we had a Doji star with a long upper shadow. These are bearish candles. The market reached for resistance at the 1064-66 (daily medium and short moving averages) level but only made it to 1061. We then closed back below the long moving average on the weekly chart again (now at 1053.82).

Unless we get a higher high today the break of the daily TD Supply line was not qualified yesterday, and so our TD Line targets remain on the downside: 987.51 (from the weekly chart) and 979.31 (from the daily chart). In fact, if the lack of a higher high today is coupled with a lower low then the price structure will look quite weak.

Bottom Line: In no way would I been long here. I have been short-term neutral since October 9th and remain that way now. Most times when the Level 1 alpha-delta trend line (shown Tuesday) is broken in the manner it was the odds are good that the subsequent decline will hold above the x pulse low (1029.38). A failure to do this would immediately change my opinion to outright bearish. I will not consider going to a long-term bearish stance unless 1019.95 is violated. 1019.95 comes from the monthly chart discussion posted last Saturday. It showed that if 1019.95 is broken the bears will have the upper hand with an initial downside objective between 910 and 940.

Looks Like a Bounce Has Started

It was an “inside” day on the daily chart of the cash S&P500 yesterday. With bullish divergence between price and the RSI in place, the index was able to stabilize. At the end of the day we were able to close above the L1 PP alpha-delta trend line (shown yesterday) and so the odds are good that the initial decline from the October 21 high is complete. On a rally from here we can look at 1054 -1057 (where the Long moving average on the weekly chart sits) and then 1064-66 (daily medium and short moving averages) as initial resistance levels.

Since the break of the daily TD Supply line was not qualified yesterday, our downside TD Line targets remain 987.51 (from the weekly chart) and 979.31 (from the daily chart). Also, as a commenter noted yesterday, the sequence of TD setup days has terminated at seven. There will be no “buy” setup to worry about in the near future. In fact, a rally now will most likely provide us with our missing TD Sequential “sell” countdown bars #12 and #13.

Bottom Line: In my opinion a rally here should not be bought but rather used as an opportunity to position oneself as intermediate term bearish (particularly if a TD Sequential signal develops). I will not consider going to a long-term bearish stance unless 1019.95 is violated.

Level 1 Price Pulses

When all was said and done yesterday we ended up with a down trending price bar on the daily chart of the cash S&P500. When prices approached the TD Supply Line (at 1052.33 yesterday) supply did indeed enter the market and we could go no higher than 1052.18. It must also be noted that the Long moving average on the weekly chart sits at 1053.77 and was itself providing resistance.

When the market sold off and broke below Friday’s low we confirmed the qualified break of the weekly TD Demand Line. This event has an associated price projection to 987.51, which is below the monthly chart’s critical support value of 1019.95. The break of the daily TD Demand Line on Friday was also confirmed yesterday and projects to a similar target at 979.31.

On the bullish side of the coin we had bullish divergence between price and the RSI at the close, and it came in the area where bull markets typically find support - around the 40 area. If any technical development sets the stage for a rally this does. If the bulls can’t take advantage of this set up then we know they currently have weak hands. Furthermore, I think that any rally that can be mustered has a very, very slim chance of making a new high from here. In fact, such a rally would most likely provide us with our missing TD Sequential “sell” countdown bars #12 and #13.

To wrap up I present the latest Level 1 Price Pulse chart. It shows that a complete five wave Elliott impulse pattern was completed at the October 21 high. The chart went on a “sell” when we broke and closed below the beta - x trend line (light blue solid line) the same day. The following alpha pulse then popped to “kiss the trend line goodbye”. Now, the pulses are hinting that the decline from the high is impulsive (five waves) which implies the correction is not over - even if we were to rally over the next few sessions. Over the very short term the market would turn bullish on a close above the alpha-delta trend line (in dark orange). Such a break should not be bought in my opinion since the Level 2 chart is now bearish (see yesterday’s mention of the trend line break). I interpret the chart to say “get bearish on strength here.”

And So November Begins

Yesterday I presented a review of the weekly chart that indicated we had just made a qualified break of the TD Demand Line. If confirmed this week (with a move below 1033.38) it projects to 987.51, which is below the critical value of 1019.95. The break of the daily TD Demand Line on Friday would project to a similar 979.31 if confirmed today. The important 1019.95 number came from the monthly chart discussion on Saturday, which showed that if 1019.95 is broken the bears will have the upper hand with an initial downside objective between 910 and 940. Other downside targets were discussed as well in those postings.

On the latest daily chart, the medium (blue line) moving average proved strong resistance last Friday. The ensuing decline retraced all of Thursday’s GDP rally and broke the Beta - Z trend line on the Level 2 Price Pulse chart. This price action begs the question: Was Thursday’s rally the bull’s last gasp? I think that it was, in the sense that the trend has now turned. The bulls may still stage a vigorous rally, but the chances of making a new high from here are quite slim.

Today will be important if only because the RSI and Composite indices are not confirming the new price low. If price and these indicators were to turn up here we could get a nice pop to the upside. Such a rally would eventually provide us with our missing TD Sequential “sell” countdown bars #12 and #13.

Weekly Chart Review, November 1, 2009

Yesterday I presented a review of the monthly chart. That work indicated that if 1019.95 is broken the bears will have the upper hand with an initial downside objective between 910 and 940. This zone complements the conclusion from last week when I wrote “At this point I note that there are no TD signals on the weekly chart. This would infer that any decline would hold above previous TDST support at 875.“

Reviewing the action over the past month or so, there has been a longstanding TD Trend Factor target of 1079.39 (solid purple line). Note that the first two times we broke that line to the upside (9/25 & 10/16) they were not qualified breaks. We finally had a qualified break the week of 10/23 but then failed to confirm this week. Result? This Trend Factor objective has been met and is acting as resistance to the advance. This week’s failure is a down trending price bar which has made a qualified break of the TD Demand Line (upward sloping dashed green line). If qualified next week with a move below 1033.38 it projects to 987.51, which is below the critical monthly chart value of 1019.95.

Another downside target would be the medium moving average (solid blue line) which should be at about 960 next week. Below that come the targets derived from the monthly charts. We should keep an eye on the market action to see how price reacts at each of these targets.

Bottom Line: The recent RSI/price divergence has led to a sharp decline this week. A move below 1033.38 would make me intermediate term bearish. Break 1019.95 and I become longer-term bearish as well.

The Monthly Chart Review for October 2009

Last month I mentioned that “… the monthly chart shows that the forty point area between 978 and 1020 is the current ground the bulls must hold.” The only meaningful decline in October saw a low of 1019.95. The bulls held the territory they had to and we ended up with another up trending price bar on the monthly chart. However, it was the weakest month in this advance since it started last March. Are we stalling (or topping!) at the TD Trend Factor target of 1085.13 (horizontal purple line)?

In the last monthly report I said that there were three good indicators to watch that would signal a high probability that the rally is complete. The first was the TD Demand Line (upward sloping dashed green line) which sat at 1021.22 last month. We actually broke below that level during October and it was a qualified break. This is another indication that the rally is in trouble. Bears now need to see this break confirmed. Of course those of the bullish persuasion want the opposite. Confirmation requires that we open the month below 1071.86 and then move below the October low. A confirmed low projects to 941.08.

A second indicator is the TD REI oscillator (bottom pane). While still in overbought territory, it still has not been there long enough to indicate that a persistent uptrend has been established. Therefore, bears want to see this indicator fall below .45 in November (there is a solid horizontal blue line on the chart at this level). Bulls would love to see this level held. Beyond that, a TDPOQ “sell” will be generated if we open above 1019.95 on Monday and then move lower than that value.

Finally, it is now clear that the upward moving Level 4 Alpha price pulse is complete. This means that either a complete Elliott Wave zigzag pattern (A-B-C) has formed from the March low or the first three legs (1-2-3) of an Impulse. I have also drawn a Level 2 TD Line on the chart (solid blue line). It connects the 10/07 and 5/08 highs. In October of this year that line stood at 1097.65. Our high was at 1101.36. Note also that it has been a Fibonacci eight months since the February closing low.

Bottom Line: Although we can’t claim that the rally from the March low is complete, the monthly chart shows that it is in trouble. A move below 1019.95 would turn the tide to the bearish side. The first downside objective being the 910-940 area.

Surprise, Surprise! Rally on the GDP Numbers

Not surprisingly, the cash S&P500 rallied on the GDP number yesterday forming an up trending price bar on the daily chart. An oversold rally has begun. The question is whether it can take us to new highs or not.

The bulls will be banking on the fact that the Beta - Z trend line (on the Level 2 Price Pulse chart) held yesterday and that is where the rally launched from. The rally also came with the RSI in the area where bull markets usually find support and was at the weekly short moving average.

However, I think that the bulls are only hanging on by a thread. This may be a “last gasp”. The TD REI has now been less than -.40 for six sessions, which usually indicates that a strong downtrend has developed. A close today above 1063.26 would print TD Sequential “sell” countdown bar #12 (of the required 13).

Working Road Map: With momentum indicators having failed and two versions of the Elliott Wave count showing large patterns having possibly completed, I think the odds that a significant top is in are quite high. Still neutral (since October 9th) but looking to get bearish. Here is my best guess for what happens over the coming days: If the rally that began yesterday is destined to fail then it will do so no later than November 6. I am looking for TD Sequential and/or Combo “sell” signals on this bounce to turn me short-term bearish. When would I turn outright bearish if we just continue down? Below 1019.95.

Will GDP Report Be Used to Rally the Market?

Yesterday was not a good day to be a bull as we had the weakest daily price action since the first day of the month. The down trending day in the cash S&P500 sliced through two downside targets. The only one remaining from those mentioned yesterday is 1016-22 where we have the last swing low, previous TDST Support, a TD Trend Factor target and the area to which the long (solid green) moving average is moving. Also note that the price action has now turned the swing chart (solid orange) down.

The bulls are now hanging on by a thread. For today all eyes will be on the GDP number released at 0830 EDT. Technically, the RSI is back down to 41, the area in which support is found “if” we are still in a bull market. Can the bulls hold here? The TD REI has now been less than -.40 for five sessions. Another session below that value indicates that a strong downtrend has developed. Can the bulls hold here?

With the market at key Price Pulse trend lines (on the Level 2 and 3 charts) the bulls have another reason to try and rally this market. It would not surprise me to see an oversold rally take hold here, especially if the GDP numbers are viewed as “better than expected”. But personally I expect such a rally to fail.

Working Road Map: With momentum indicators having failed and two versions of the Elliott Wave count showing large patterns having most likely completed, I think the odds that October 21 marked a significant top are quite high. Still neutral (since October 9th) but looking to get bearish. Here is my best guess for what happens over the coming days: The next short-term bottom (which is due this week) will lead to a push up that must complete by November 6 and most likely will fail to make a new high. I am looking for TD Sequential and/or Combo “sell” signals on that bounce to turn me short-term bearish. When would I turn outright bearish if we just continue down? Below 1019.95.

Signs of a Significant Top Continue to "Sprout"

Although not as strong a down day (as objectively measured by the swing index) the cash S&P500 still drew a down trending price bar on its daily chart. Price has been declining since the TD Sell Setup was perfected on October 19. Yesterday’s decline has now produced a complete five wave count (and hence price exhaustion) under D-Wave from the March low to the October high.

So where are we with regards to this developing pullback? Looking at the attached chart we can see that we are still in contact with the medium moving average (solid blue line). Yesterday’s low was at the 50% Fib retracement of the rally up from October 2. If this is not the low where else should we look? Three technical targets jump out, the first being the gap from 1057.58 - 1060.03 formed on October 7-8. Interestingly the weekly long moving average sits at 1057.35 today. The next target is the 1048-1051 level. Here we have a Fib retracement, TDST Support, and the price target from the recent break of the TD Demand Line (up sloping dashed green line). Below that is 1016-1022 where we have the last swing low, previous TDST Support, a TD Trend Factor target and the area to which the long (solid green) moving average is moving.

Working Road Map: With momentum indicators having failed and two versions of the Elliott Wave count showing large patterns having possibly completed, I think the odds that a significant top is in are now quite high. Still neutral (since October 9th) but looking to get bearish. Here is my best guess for what happens over the coming days: The next short-term bottom (which is due this week) will lead to a push up that must complete by November 6 and will most likely fail to make a new high. I am looking for TD Sequential and/or Combo “sell” signals on that bounce to turn me short-term bearish. In the meantime let’s see how price reacts to the 50% Fib level reached yesterday and/or the lower targets mentioned.