Bull/Bear Battle Continues

After declining to just shy of the 38.2% retracement level the cash S&P500 reversed course and ended higher for the day. We finished the session with an “outside” price bar on the daily chart and the configuration one of our readers has been looking for over the past two days. As he/she said once we exceeded Wednesday’s high “And there it is - higher high -- should be interesting -- now we need to watch for a price flip and confirmation of downtrend with td ref closes”. The price flip mentioned would occur today on a close below 1025.57 and would go a long way to “confirm” the recently completed TD Sequential countdown.

Watching the price pulses, it was clear that going into yesterday’s session we were in a downward moving Beta pulse -- and so I thought that yesterday and today would be critical to the bear case. The longer in time that Beta lasted the higher the odds that the next upward pulse, Delta, will fail to make a new high. Well there is now a good chance that Beta completed at yesterday’s low and that Delta is underway (there is no foolproof way I know of to be certain). If Delta fails to make a new high then we know that the trend has reversed to down and the bear case remains intact. But what if Delta makes a new high here?

The first thing I note is that the TD Demand Line (at 1037.66) aligns with the level we are watching to see if Delta breaks. Exceeding that level today will not “qualify” the break. Furthermore, a move to new highs here would undoubtedly leave all of the momentum indicators trailing (bearishly diverging). Conclusion: Even a push above 1037.75 in a Delta pulse will leave the market vulnerable to further downside action over the next week or so. In this scenario one way to measure the risk of being wrong (that is, that the market will continue higher without coming back) is through the TD Risk calculations. As I calculate it, the level associated with the just completed sequential is 1049.93. I would let a break of that level end the bear hopes here.

Bottom Line: Short-term bearish; but expecting a resumption of the rally that lasts at least until the Equinox. I would re-think my short term bearish view on a break of 1049.93.