Doji Week

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Although technically an uptrending price bar we really didn’t go much of anywhere this past week in the cash S&P500. In fact, the weekly candlestick ended as a Doji (opening and closing prices essentially the same). With prices now moving laterally for a couple of weeks we were also not able to follow through on last week’s break of the TD Demand line (dashed green line on today’s posted chart). Although the price projection of 837.81 still stands, our failure to break below 878.94 this week makes me wonder whether the bears can push this this market lower immediately.

One piece of evidence to support another bullish foray to the upside was presented by an astute reader of this blog last week. The idea is that although we have now reached a TD sell Setup (nine consecutive upward moving bars) on the chart the arrangement has not yet been “perfected”. Perfection requires that the high of setup bar eight or nine (or a subsequent bar) be greater than, or equal to, the highs of setup bars six and seven. As Jason Perl writes in his (excellent!) book on DeMark Indicators, “… as long as that situation exists, the risk is for a retest of the price high …”

Of course the bears have arguments on their side as well. Last week I wrote “The weekly TD REI … has also signaled a “sell” by dropping through 879.21.” That signal is still active. The 930 price high reached is also noted to be trine the 667 March low and now stands as a price fractal high.

Bottom Line: Is a retest of the high in the cards or are have we already started on our way down? I favor the latter interpretation based on my latest price pulse work, which I will discuss in my next post. I remain convinced that a deep retracement of the rally from March 6 has begun, but also believe that the lows for the year (though perhaps not the bear market) are in.

Enjoy your weekend!