Level 3 Beta Pulse Underway?

It was a down trending day in the cash S&P500 on Friday. During the session we broke, but then closed above, both the TD Demand line and the short moving average. But can we hold for long?

As noted in the weekly review, there are key levels just above the market: The weekly TD supply line is at 1006.12 and the 38.2% Fibonacci retracement level is at 1014.14. Since breaking these levels imply that there is a good chance the market will be able to hold them by the end of the week, the price action early this week will set the tone for how we finish.

Last Thursday the market made its highest closing high in this rally. Neither the RSI (shown on today’s chart in the upper pane), Composite Index or Derivative Oscillator (middle pane of chart) confirmed. Momentum has been failing on the daily chart over the past week or so and has been accompanied by a TD Combo 13 count.

Bottom Line: A failure to break above 1006.12 today would strengthen my belief that the pullback associated with the Level 3 Beta pulse (see the July 25 post) is underway. Initial downside targets are 983 and then 961.