It was an uptrending month as we continued the rally from the March low of 666.79. Note that there was a “perfected” TD Setup on the February 2009 price bar. Does this formation mark the completion of the bear market? I don’t think so as there was no technical “buy” signal in my key indicators – the RSI and Composite Indices. There is neither a divergence between price and the RSI (top pane) or between the RSI and the Composite (middle pane).
Without a supporting signal in my key indicators I am forced to interpret the action since the March bottom as a bear market rally. The question then becomes “how high will we bounce before the down trend resumes?” To answer this question I like to calculate targets using Fibonacci, Gann, TD Lines and TD Trend Factor; looking for areas where the techniques overlap. Note on the chart that we have pushed through the 23.6% retracement but it was not “qualified” in the DeMark sense. This makes me first focus on targets below the 38.2% retracement level.
That leads me to look at my Gann moving averages (red, blue and green lines). I then note that the short moving average (red) is sloping down to intersect the TD Trend Factor target of 973.83 (purple line) over the next month or so. It also must be noted that we are currently “stuck” at resistance provided by the TD Trend Factor of 922.54 and the TD Supply line projection of 925.99. This is the area that has led to a sideways moving market since May 8. Lastly I want to note targets from the Square of Nine: 1012 is conjunct the March low (and aligns with the higher 38.2% Fib level as well as the TD Trend Factor target of 1027.98). 971 and 930 are both Trine and align with the two previously discussed targets. I therefore feel comfortable with 930, 971 and 1012 as targets.
Once we get to a target it is time to check the next lower time frame for evidence of a reversal. We are at the first target now. I will review the latest weekly chart tomorrow.
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