Delicately Poised

The cash S&P500 formed a downtrending price bar on Wednesday, retesting the prior 930 resistance area to see whether it has become support. So far it has held. I continue to look for a 1 to 3 day pullback (today would be day 2) followed by another thrust towards 970. Of major interest will be whether the weekly price bar closes lower. That weekly close is even more important now …

Two significant developments took place yesterday that demand attention. First, the Relative Strength Index flashed a bearish divergence with price (see upper pane of daily chart). Secondly, the 949 high is in Opposition to the 666.79 low recorded at the start of this rally in March and 950 is Square to March 6. This price action is a clear caution to think about protecting any profits generated by the rally from the March low and will force me to change my short-term view if we can not close higher on a weekly basis.

With the market poised at such a balance point the TD Supply (949.34) and Demand (902.95) Lines (dashed red and green lines on the chart) assume increased importance today. A move through either one would be qualified.

Bottom Line: I think we are nearing the end of the rally from March. A failure to close higher this week would lead to a multi-week corrective pullback. A higher close this week points to the rally extending to the 970 area where we have to watch for the start of a much deeper multi-week corrective pullback.