The consolidation in the cash S&P 500 since May 8 can be described as a contracting triangle pattern (see Friday’s post) and was in response to the strong overhead resistance at 930 as shown in the monthly post on Saturday. Is this triangle part of a topping action or would we break out to the upside? The weekly chart (see yesterday’s post) argues for higher prices and it does appear as though price began a breakout from the triangle just before the close on Friday.
Friday’s uptrending price bar was number six of a possible TD Sequential “sell” signal. With 13 bars required at a minimum before the signal, we may have well over a week left of rising prices. After the failure to move below 879.61 last week (indicating that the Z pulse had already completed with bullish implications for the immediate future) we had the subsequent Alpha pulse break the Delta – Y trendline on Friday generating a price pulse “buy” signal. The first upside level to watch is the previous 930.17 high. I wouldn’t be surprised if we test this level and drop back yet again before finally pushing through. One reason to think we won’t push cleanly through 930 on the first attempt this week is that the TD Supply line was not qualified when broken on Friday.
Many times a good price target after breaking out of a triangle is a Fibonacci percentage of the triangle’s “b” wave. Note the 161.8% level is near the backside of the weekly TD Demand line. This makes 962-964 an area worth watching *if* we get through 930.
The mechanical (experimental) trade position remains short from 897.34 (5/12) with a stop & reverse at 924.61.
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